25 Jan (Telegraph) - China plans to cash in on the soaring copper price by using its substantial reserves to snap up global assets while prices are low.
Lu Youqing, vice-president of Aluminium Corp of China (Chinalco), said that the state-owned group was studying worldwide copper resources to identify the best investment opportunities.
"Copper is our next main development target," Mr Lu said in an interview with Reuters, citing Toronto-listed Ivanhoe Mines' copper-gold project in Mongolia as a potential target. Mr Lu declined to comment on the amount of money that Chinalco has earmarked to make such purchases, however, he said the company is yet to enter talks with any potential sellers.
Asian shares climb on optimism Government stimulus will help economiesCopper prices have surged by 130pc since the start of 2009, with the aluminium price up a more modest 44pc, The positive outlook for copper prices prompted Chinalco to establish a subsidiary last year, China Copper Company. The unit now has about 60bn yuan (£5.4bn) of assets, but there are no imminent plans to list the business separately, Mr Liu said.
In June last year, Rio Tinto spurned Chinalco's proposed $19.5bn (£12bn) cash injection, which would have doubled the Chinese group's stake in the miner to 18pc. Instead, Rio undertook a deeply-discounted rights issue and put its Australian iron ore assets into a joint venture with BHP Billiton. Yesterday, the European Union launched an antitrust probe into the proposed iron ore venture, which had been widely expected.
Chinalco currently owns 9pc of Rio Tinto and Mr Lu also denied the recent rumour that the company was about to sell its stake to China Investment Corp, China's sovereign wealth fund.
Chinese companies spent more than $30bn buying foreign mines and oil deposits last year, as asset prices tumbled. Analysts are generally downbeat on prospects for the aluminium price, but more bullish on copper.
Chinalco also said yesterday that it had posted a profit in the second half of the year, compared with a loss in the first half of 2009. No profit figure was revealed, but the company's full-year sales rose 10pc to 142bn yuan. In December, capacity utilisation at its aluminium operations exceeded 90pc, with production costs falling 17pc over the year.