Chinalco president wants bigger Rio Tinto stake
SHANGHAI: Chinalco, the Chinese aluminum giant that led a $14 billion investment in Rio Tinto, is more likely to raise its stake than reduce it, its president said Tuesday.
“I feel the price was very good,” said the president, Xiao Yaqing. “It was a very appropriate price. The price was not high considering Rios value. In the current circumstances, the possibility of raising the stake is higher than cutting it.”
Chinalco and the U.S. aluminum company Alcoa jointly bought 12 percent of Rios shares listed in London, or 9 percent of the total, on Jan. 31 at an average price of almost 59, or $120, per share. The shares closed at 50.61 on Monday.
Xiao declined to say how many shares the two firms might buy if they raised their stakes. But no move is imminent.
“Alcoa and Chinalco have not made a plan for the next move yet,” he said.
The companies made the 12 percent purchase under a one-month agreement, now expired, that had allowed a stake of up to 14.9 percent of shares listed in London.
Rio also has a listing in Sydney and, under Australian law, foreigners can buy up to 15 percent of an Australian company before they must seek government approval to buy more.
Xiao has said he filed papers with the Australian authorities as a courtesy, even though the initial purchase did not involve Australian shares.
Chinalco controls Chinas largest alumina and aluminum producer, Aluminum Corp. of China, also known as Chalco.
Xiao said he expected aluminum prices to stabilize this year at around 20,000 yuan, or $2,821, a ton in China and at about $3,000 a ton on the London Futures Exchange, partly because of strong demand in China.
“The prices can help us to offset losses during the production halt hit by the severe weather in the winter,” Xiao said, adding that Chalco lost about 200,000 tons of aluminum production out of Chinas overall loss of 500,000 tons to 600,000 tons.
Xiao also said Chalco did not plan to cut its alumina prices. The companys prices are about 18 percent higher than its Chinese competitors.
He said he expected China to become a net importer of aluminum in the fourth quarter of 2008.
Chalco, the fourth-largest aluminum producer in the world, reported annual earnings that were below expectations Monday after it failed to offset weakening prices and high production costs by increasing output, and analysts say it could have a tough time in 2008.
