Australian media has reported that Aluminum Corporation of China Limited (Chaclo, 601600) plans to buy into Fortescue Metals Group Ltd (FMG), a new Australian iron ore exporter. Chalco, China's biggest aluminum producer, was reported to be seeking part of a 16% stake in FMG held by Harbinger Capital Partners. Meanwhile, Baosteel, parent company of Baoshan Iron & Steel Co. Ltd (600019), and Sinosteel Corporation are also expected to buy certain stakes in FMG.

With the rapid change and competition in the global metal market, and the rapid integration of mine resources companies in the international market, China's domestic steelmakers are exploring foreign mines, hoping that acquiring foreign mine assets will bring more profits to their companies. The most conspicuous one was Chalco's purchase of Rio Tinto. Chalco, together with Alcoa, bought a 12% stake in Rio Tinto (Britain) listed on the London Stock Exchange for USD 14.05 bln, or 9% of the total issued shares of Rio Tinto Group, becoming the largest single shareholder of the world's third largest mine resources company. In 2007, Chalco was also involved in many overseas investments, including the Queensland bauxite project and the acquisition of Peru Copper Company, the world's ninth largest copper producer. It was reported China Investment Corporation, the country's state-run foreign exchange investment company, and China Shenhua Energy Company Limited (601088) also plans to acquire a 15.85% stake in FMG for USD 2 bln in early 2008. Unofficial negotiations have begun for this deal.

As a new mining company, FMG plans to expand mining capacity by 50 million tons of coal per year, 28 million of which will be for export. The company had signed 28 long-term iron ore supply contracts with China's steelmakers. 90% of its products will be exported to China.

The price of A-shares of Aluminum Corporation of China Limited closed at RMB 22.65 per share on 12 May 2008, up 2.26%. On 9 May 2008, its H-shares closed at HKD 12.46 per share, down 1.11%.


Source: www.takungpao.com

Date: 13 May 2008

CN01/JC/KM