China Aluminum enters coal and iron ore fields for three years

On August 24th, at the 2010 China Aluminum Corporation Interim Results Presentation Meeting in Shanghai, the company’s chairman and CEO Xiong Weiping stated that the company plans to complete the strategic transformation in three years, shifting from single aluminum industry to aluminum-based industry-related With diversified development, the company decided to enter the coal and iron ore fields.

Xiong Weiping told the China Securities Journal that the joint venture agreement will be approved by the Chinese and Guinean governments. At present, Guinea is currently conducting general elections, but the company believes that the Guinean government will approve the project.

Recently, there are market news that Chinalco may also be interested in Potash, Canada’s largest potash company, which BHP Billiton intends to acquire. Xiong Weiping indirectly denied the news. “Chinalco's investment and acquisitions must first meet the company’s development strategy and also have investment returns. Chinalco is not interested in any major projects."

Into the coal and iron ore fields

Xiong Weiping said that Chinalco plans to use three years to complete the strategic transformation, from a single aluminum industry to the diversified development of aluminum-based industries, for which the company decided to enter the coal and iron ore fields.

At present, Chinalco needs to purchase 20 million tons of coal each year, accounting for 40% of the company's production costs. Xiong Weiping said that at present, the company's aluminum industry lacks assets to support the upstream industrial chain, and coal is the industry most closely associated with the aluminum industry. To this end, Chinalco plans to build 2-3 coal bases for supporting downstream aluminum power in three years, and strive to obtain preferential policies for direct power purchase.

On July 29, Chinalco signed a binding agreement with Rio Tinto and the two parties will set up a joint venture company to jointly develop the Simandou iron mine in Guinea. The mine will have an annual output of more than 70 million tons of iron ore and will give priority to the needs of the Chinese market.

In early August, Mahmoud Thiam, Minister of Mines of Guinea, said that the Guinean government has not formally approved the joint venture plan for the Simandou iron ore project. In response, Xiong Weiping said that the joint venture agreement will also be approved by the Chinese and Guinean governments. Guinea is currently in the election period, but the company believes that the Guinean government will approve the project.

Xiong Weiping believes that there is currently no special iron ore business segment in Chinalco's diversified business. According to Chinalco's multi-metal development strategy, it is optimistic about the future growth of iron ore, and it is also beneficial to improve the company's business structure.

At present, Chinalco's seven business segments are divided into aluminum, copper, rare earth, international engineering, trade, resources and overseas investment. Xiong Weiping said that the company will increase structural adjustments and improve its industrial chain. In the future, it will also take rare earth resources as one of its important strategic goals.