Chinalco Sets Up Unit for Mining Resource Purchases (Update1)

SHANGHAI, Sept. 25 -- Aluminum Corporation of China, the nation's biggest producer, formed a mining resources unit to acquire raw material assets locally and overseas, the Ministry of Land and Resources said.

The unit will seek reserves of minerals including aluminum, copper, iron, coal, gold, zinc and lead, the ministry said today on its website, without giving more details. The unit's initial capital of 300 million yuan ($45 million) will increase to 1 billion yuan in two years, it said.

Chinalco, as the Beijing-based company is known, aims to enter new businesses and cut its dependency on smelting revenues as China faces an aluminum overcapacity. Its listed unit Aluminum Corp. of China Ltd. agreed on July 29 to pay $1.35 billion for a stake in Rio Tinto Group's Simandou iron ore project in Guinea, making its first investment in the commodity.

Aluminum Corp. of China Ltd., or Chalco, gained 0.4 percent to HK$6.83 at the close of trading in Hong Kong. The benchmark Hang Seng Index climbed 0.1 percent.

Chalco, which also has Chinalco's aluminum assets, posted a loss of more than 500 million yuan ($74 million) in June alone after China increased power rates. Chalco needs three years to achieve its strategic shift into the various businesses from only aluminum, Chairman Xiong Weiping said Aug. 24.