BEIJING, Oct. 11 (Bloomberg) -- Aluminum Corp. of China, the nation's biggest producer, said it will "strictly" control project investments and be "prudent" on acquisitions amid a slump in metal prices.
The company, known as Chinalco, should "get well prepared to counter tough challenges" and ensure its financial safety amid market volatilities, General Manager Xiong Weiping said in a statement on the company's website today.
The LME Index of six base metals traded in London has dropped 24 percent from a February high on concerns the European debt crisis and a slowdown in the U.S. economy may curb demand for commodities. Xiong in March boosted the company's annual spending 54 percent to 22.5 billion yuan ($3.5 billion) to diversify into coal and bauxite from "low-margin" aluminum production.
"We should stick with the principles that cash is king and investment return is the priority," Xiong said in the statement, which said he made the comments at a Sept. 23 company meeting. He said the company will continue with its "strategic transformation".
Aluminum Corp. of China Ltd., the listed unit also known as Chalco and chaired by Xiong, pared some of its earlier gains today in Hong Kong trading following Xiong's comment.
The shares traded at HK$3.68 as of 2:23 p.m. local time, after climbing as much as 6.2 percent to HK$3.78. The stock has fallen 48 percent this year, compared with a 21 percent decline in the benchmark Hang Seng Index.
Chalco's first-half profit fell 22 percent to 412.6 million yuan because of higher production costs and a 273 million-yuan writedown on a terminated bauxite project in Australia. Full- year profit may rise 88 percent to 1.46 billion yuan, according to the mean estimate of 10 analysts' forecast compiled by Bloomberg.
Chinalco in June took over five rare-earth companies in Jiangsu province to boost capacity. It is also looking at coal in Chinese provinces, including Xinjiang and Inner Mongolia, Xiong said in March.
Chalco agreed in July last year 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.