Chalco Plans $2.1 Billion of Spending, Seeks Power Investments

BEIJING, Mar. 31 -- Aluminum Corp. of China Ltd., the nation's largest producer of the metal, is planning 14.6 billion yuan ($2.1 billion) of capital expenditure this year and is seeking investments in coal and power.

The company known as Chalco wants to buy coal mining rights in China and invest in aluminum plants in Saudi Arabia to benefit from cheaper power, Chairman Xiong Weiping said today at a press conference in Hong Kong. Chalco will increase capital expenditure by 36 percent, including 3 billion yuan ($440 million) for overseas project, he said.

Higher-than-expected costs led to the fourth-quarter loss for Chalco, and the metal producer will face "continued" pressure, according to a report by Goldman Sachs Group Inc. yesterday. Aluminum consumption in China, the biggest consumer, will expand by at least 20 percent this year, driven by an economic recovery, Chalco said March 23.

"The company will enhance coal and power investments to realize low-cost production," Xiong said. It will also phase out outdated aluminum plants and build new smelters in areas with "rich" coal and hydro power resources, he said.

Beijing-based Chalco rose 2.7 percent to close at HK$8.13 in Hong Kong trading. Alumina is a semi-finished material used to make aluminum metal.

About 40 percent of Chalco's production costs for aluminum came from alumina, and 35 percent from power, according to the March 29 Goldman Sachs report.

Capital Spending

Chalco will boost capital spending from 10.7 billion yuan last year, Xiong said. Of the money earmarked for overseas projects, some will be for feasibility studies, he said, without giving details.

The plan to restructure the company's production base and increase investments in power should be completed in three years.

Chalco has signed five power agreements that will help reduce costs by 54 million yuan a month, Xiong said. The company is also seeking to speed investments in bauxite, a material used to make alumina, he said.

The metal producer posted a fourth-quarter loss of 1.1 billion yuan on March 26, missing the mean estimate of a profit of 1.4 billion yuan of 20 analysts compiled by Bloomberg.

The company will close 1 million metric tons of outdated alumina production capacity and 200,000 tons of outdated aluminum plants by the end of this year, said Vice President Liu Xiangmin at the same conference today.