Chinalco says may up Rio stake if conditions right

SHANGHAI, Sept 1 (Reuters) - Chinese aluminium maker Chinalco may increase its minority stake in Anglo-Australian miner Rio Tinto if market conditions are right, but has no timetable for such a move, its president said on Monday. "Under the right market conditions, this is an option, it is possible. But we have not decided when. It will depend on the timing of opportunities in the market and our requirements," Xiao Yaqing told reporters in Shanghai. "A key requirement for the company is to preserve its opportunities and possibilities as we become more international." Chinalco and U.S. aluminium firm Alcoa Inc jointly bought 12 percent of Rio's London-listed shares, or 9 percent of Rio Group's total equity, in January. The companies have Australian government approval to raise their combined stake to 14.99 percent of the shares in Rio, equating to about 11 percent of the Rio Group. Rio is listed in both London and Australia. Rio Tinto is defending itself against a $150 billion takeover bid from bigger rival BHP Billiton, which is awaiting clearance from Australian and European regulators, due later this year, before formally launching an offer. FOREIGN COOPERATION Xiao, who also chairs Aluminum Corp of China Ltd (Chalco), which is controlled by Chinalco and is China's largest alumina and aluminium producer, added that alumina prices would be volatile in the second half of this year and primary aluminium prices could fluctuate around 18,000 yuan ($2,628) per tonne. He also said aluminium production may be restricted if power prices keep rising. China has raised electricity prices and more increases are expected as rising coal costs have pinched power generators and prompted many to curtail coal purchases and power output, contributing to a power shortage over the summer. Chalco on Friday posted a near two-thirds drop in first-half net profit, hit by high production costs, output disruptions and aluminium oversupply. The company's shares in Hong Kong were down 1.6 percent at HK$6.91 by 0324 GMT on Monday, while its Shanghai-listed shares were off 3.7 percent at 9.81 yuan. The company, which faces fierce competition and increasingly scarce raw materials, plans to raise capital over the next two years and diversify overseas. Xiao said Chalco would welcome cooperation in its Aurukun bauxite project in Queensland, Australia, from foreign players including Alcoa and Rio Tinto, and would not insist on maintaining full control. Chalco signed a deal in May last year to invest $2.4 billion in the Aurukun project, which will also include an alumina plant with annual capacity of 2.1 million tonnes. Xiao said the company's domestic bauxite projects now under construction would have annual capacity of about 10 million tonnes, with about 70 percent of that expected to be in production by end-2009.