Chinalco: Simandou Due Diligence Ongoing

Chinalco President Xiong Weiping has said his company is in the midst of conducting due diligence on its $1.35 billion deal with Rio Tinto PLC to develop the Simandou iron ore mine in Guinea.

Speaking in his capacity as chairman of Aluminum Corp. of China Ltd, Chinalco's listed unit known as Chalco, Xiong said Chinalco will decide on starting the feasibility study on the project once due diligence is completed.

On 21 March Chinalco and Rio Tinto agreed on a non-binding memorandum of understanding to set up a joint venture to develop the west African property, the first major step between the two companies to repair relations after Chinalco's plan to invest $19.5 billion in Rio Tinto collapsed last June.

Chinalco Confirms Guinea, Mongolia Talks

Chinese state-owned nonferrous metals company, Chinalco, has said it is in talks with Rio Tinto about potential joint ventures in Mongolia and Guinea, according to reports in a Chinese newspaper on Wednesday.

The Oriental Morning Post quotes vice-president Lu Youqing as saying the companies are talking about developing joint-ventures for the Mongolian Oyu Tolgoi copper-gold project as well as the Simandou iron ore mine in Guinea.

Rio Tinto, Chinalco In Talks Over Guinea Iron Ore Field

Rio Tinto and Chinalco are in discussions regarding the development of the vast Simandou iron ore field in Guinea.

Talks have been taking place in Beijing ahead of a visit to China this weekend by Rio Tinto chief executive Tom Albanese.

Any deal is likely to see Chinalco finance the next stage of pre-development, while Rio will remain the senior partner in the venture.

The two were in talks last year about a $19 billion tie-up, but the deal fell apart last June amid recriminations on both sides. However, it seems the Chinese have kept the door open for other types of co-operation. Repairing relations is a top priority for Mr Albanese while Chinalco president Xiong Weiping has refrained from publicly criticising Rio.

Meanwhile, a report by a Chinese government body failed to apportion blame for the talks’ failure to either party. The State Council's Development Research Centre added "The failure of the merger did not mean no other co-operation opportunities existed, or the breaking of mutual relations."

The two companies are believed to have discussed iron ore exploration in China and bauxite and alumina refining interests in north Queensland.

Chinalco To Influence In Rio Investment Policy

Chinalco will gain extensive powers to influence the investment policy and strategic direction of Rio Tinto's core iron ore, copper and aluminium businesses, according to special side agreements relating to last month's deal in which the state-backed Chinese aluminium group agreed to buy a strategic stake in Rio.

Behind the headlines of the February deal in which Chinalco agreed to spend $19 billion (£13 billion) in return for 18 per cent of Rio and invest in its iron, copper and aluminium assets, there are complex subsidiary agreements.

These give Chinalco representation on boards and committees that will steer huge joint ventures that house a direct Chinese investment in Rio's mining operations.

Concern is mounting in Australia over the political price Rio may have paid for Chinalco's $19 billion investment. Australia's Foreign Investment Review Board initiated a 90-day review of the investment this week.
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A leading shareholder in Rio, Australian Foundation Investment Company, has expressed disquiet over potential conflicts of interest in a state-backed Chinese metals company involved in the running of Rio's mines.

More fuel was added to the flames on Wednesday when the Chinese competition authority barred Coca-Cola's agreed takeover of a Chinese soft drinks company, Huiyuan Juice.

The extent of Chinalco's ambition to take part in the strategic direction of mining operations is apparent in a schedule to the February 12 contract, setting out a mechanism to create a strategic alliance vehicle (SAV) under which Chinalco will own 15 per cent of Hamersley Iron, a Rio Tinto subsidiary.

Chinalco will nominate two directors to the five-man board of Iron Ore SAV. The Chinese group will also have two out of six directors on the Iron Ore Strategic Alliance Committee, which approves investment programmes and budgets.

The Chinese company has equal representation on the copper and aluminium strategic alliance committees, although the Rio-nominated chairman has a casting vote. The SAVs will create sales marketing companies, controlled equally by Chinalco and Rio.

According to a Rio spokesman, Chinalco will have votes on the strategic alliance committees only according to its proportionate ownership interest, which is below a controlling interest.

Source: Times Online

Drop In Revenues At Chinalco

China's state media said on Monday that the country's largest alumina producer, the state-owned Aluminum Corp of China (Chinalco), saw a 4.3 percent fall in revenues in 2008. The fall is being blamed on lower prices.

A spokesman for the companu, Lu Youqing, said that revenues fell to 126 billion yuan ($18.43 billion) in 2008 compared to 131.7 billion yuan the previous year. The company said that in 2008 it produced 10.1 million tonnes of alumina, 3.4 million tonnes of primary aluminium and alloy, 930,000 tonnes of aluminium products, 390,000 tonnes of refined copper, 150,000 tonnes of copper products and 4,450 tonnes of titanium sponge.

The company's Chalco subsidiary cut its spot alumina prices by 23 percent at the beginning of this year, after reducing the prices by 38 percent last year on weaker demand.

China's domestic aluminium prices are expected remain below the cost of production in 2009 according to Mr Wen Xianjun, vice chairman of China Nonferrous Metals Industry Association, said on Monday.