Chinese mining giant on the prowl 
for copper investment opportunities

Posted by tjdetai on July 23rd, 2015

China’s largest diversified mining company, the State-owned Aluminium Corporation of China (Chinalco), is looking worldwide for investment opportunities in copper, a metal which now has greater demand growth potential in China than aluminium. “Copper is our next main development target,” Chinalco vice-president Lu Youqing told the Reuters news agency.

He said that a copper-mining and smelting project was probably going to be the group’s next major international acquisition. He even went so far as to identify the Oyu Tolgoi copper/gold project in Mongolia as a potential target, although he stressed that Chinalco was not yet in any talks with anyone about buying copper projects or operations.

Oyu Tolgoi is being developed by Toronto-listed Ivanhoe Mines, which has approved a 8-million construction budget for the openpit mine for this year. Oyu Tolgoi is expected to enter commercial production in 2013. The mine will be only 80 km from the Chinese border and it has meas-ured, indicated and inferred resources of some 3,6-million tons of copper and 45-million ounces of gold. The Canadian company owns 66% of the project – the other 34% belonging to the Mongolian government.

Regarding Ivanhoe, Lu added that buying equity in that com-pany “mainly would depend on the price and cost”.

“If the cost is right, of course, we are willing to consider.” Interest-ingly, global mining group Rio Tinto holds 19,7% of Ivanhoe, and Chinalco owns 9% of Rio Tinto.

Last year, the Chinese group tried to double is holding in Rio, with an offer of a ,5-billion cash injection, but this was rejected by Rio. (Lu denied recentrumours that Chinalco was going to sell its stake in Rio to China’s sovereign wealth fund, the China Investment Corporation).

Chinalco started a major expansion of its copper business in 2007. In that year, it bought 49% of China’s third-largest copper producer, Yunnan Copper, for ,4-billion. Chinalco hopes to increase its shareholding in Yunnan.

Also in 2007, Chinalco acquired 100% of the Toromocho mining project, in Peru, for 0-million. The company plans to invest ,15-billion in this project. Construction of the Toromocho mine will start this year and it is expected to have an annual production of 250 000 t of copper in concentrate from 2012.

Chinalco also acquired 80,99% of Luoyang Copper, 66,67% of Daye Copper Plate & Strip, and 44,14% of Shanghai Copper. Chinalco Luoyang Copper, as it is now called, is the largest non-ferrous metals fabrication company in China.

Last year, Chinalco set up a subsidiary, the China Copper Company, to control its copper assets. For its copper business, Chinalco’s focus is on vertical integration, economies of scale and technology leadership.

The group has also reported that it made a profit in the second half of last year, in contrast to the first half, when it made a loss. It did not give a figure for this profit, but did reveal that, over the whole of 2009, its sales had increased by 10% and its production costs had fallen by 17%.

Chinalco was created in 2001 by the merger of 12 Chinese aluminium companies. Currently, it mines bauxite, copper, and titanium, producing alumina, aluminium, copper concentrate, copper cathodes, fabricated copper products, sponge titanium and titanium alloys. Chinalco’s groupwide strategy is to expand its businesses vertically, including the exploration, mining and processing of metals and minerals, and become a global major diversified resources company.

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