Chinalco to Buy More Copper Producers to Meet Demand

Oct. 19 -- Aluminum Corp. of China, parent of the nation's biggest producer of the metal, plans to buy more overseas copper mining companies to meet rising domestic demand and help diversify earnings. The Beijing-based company plans to "make moves on several firms listed on overseas markets"and may make an announcement this month, Xiao Yaqing, chairman of the state-owned company, also known as Chinalco, told reporters yesterday. Chinalco bought Peru Copper Inc. for $860 million in August. Mining companies in China are likely to buy metal deposits and oilfields in Africa, Latin America and Australia to feed demand, Citigroup Inc. said this month. The nation needs more commodities to fuel growth and almost doubled copper imports in the first nine months of this year. "China wants a large state-owned, metal and mining firm to secure supplies to meet its surging demand,"Heng Kun, an analyst at Essence Securities Co., said in Beijing. "Xiao's ambition is to fulfill that role and overseas acquisitions are obviously the quickest way." Vancouver-based Peru Copper owns Peru's third-largest deposit of the metal used to make wires and pipes. Chinalco also agreed this year to buy a 49 percent stake in Yunnan Copper Group, which owns China's third-biggest producer. China Short "We hope to acquire more copper resources because this is where China is short,"Chinalco's Xiao said at the sidelines of the Communist Party congress. The Chinese government wants to build up strategic reserves of minerals, and has urged companies including Chinalco's publicly traded unit, Aluminum Corp. of China Ltd., or Chalco, to secure raw materials overseas to ensure the nation's metal needs are met. China Minmetals Corp., the nation's biggest metals trader, plans to buy more copper resources overseas, a company executive said Sept. 6. Anshan Iron & Steel Group, China's third-largest steelmaker, this year agreed to a A$1.8 billion ($1.6 billion) joint venture with Australia's Gindalbie Metals Ltd. to develop two iron ore projects There are no immediate plans to buy more copper companies in China, Xiao said. The increased size of overseas mining companies may make an acquisition "difficult,"he said. Copper prices have rallied 24 percent this year, partly as demand from China helped shrink reserves. London Metal Exchange copper for delivery in three months was little changed at $7,865 a metric ton at 9:48 a.m. Shanghai time, after falling as much as 1.9 percent yesterday Oxiana Forecast The price next year may exceed the record $8,800 a ton reached last May due to Chinese demand, Oxiana Ltd., a Melbourne- based Australian miner of copper, said today. Chalco, China's largest producer of aluminum, the light metal used in packaging and aircraft parts, posted its first profit decline in five years in August. Full-year profit is "under a lot of pressure,"because of the rising costs of electricity and the raw material bauxite, and it will be "difficult"to exceed last year's income, Chinalco's Xiao said. The company in April said full-year profit may fall 1.8 percent to 11.1 billion yuan this year. Chalco fell 0.55 yuan, or 1 percent, to 50.17 yuan at 3:00 p.m. in Shanghai. Chinalco, which spends most of its budget on aluminum production, plans to allocate more than half of future expenditure to copper production to diversify away from aluminum, Xiao said. He didn't specify when that would happen. It's also boosting exploration spending for other minerals including titanium and magnesium, he said.