Chinalco sees Rio as key partner
Chinalco, the Chinese aluminium group, has no plans to sell down its shares in Rio Tinto, viewing the mining house as a key strategic partner as Chinalco expands overseas. “We can’t go out to fight alone,” said Chinalco chairman Xiong Weiping, explaining that co-operation with global miners was essential for overseas development. “With Rio being one of the top mining companies in the world, Chinalco can learn a lot from them, [including in operational management, asset operation and risk management.]”His remarks on strategic co-operation underline the challenges that Chinese miners face as their expansion plans run into political opposition in resource-rich countries such as Australia.
Chinalco has seen its own share of disappointments there, including a failed $19.5bn investment in Rio in 2009. Chinalco is Rio Tinto’s largest shareholder, controlling nine per cent of the global miner, in a symbiotic relationship that has also seen the two companies sign joint ventures for projects in Guinea and in China.
Speculation has long centred on whether Chinalco might sell down its stake, acquired in a dawn raid during the contested $147bn bid for Rio launched by BHP Billiton, which ultimately failed. Mr Xiong said that “at present, we do not plan to increase or decrease our shares.”
“Through our purchases of Rio stock, we developed a deep understanding of Australian law, Australia’s stance and attitude towards its own resources, and Australian public opinion,” Mr Xiong said.
Chinalco is seeking to move into mining to take advantage of the commodities bull run that has been created by China’s huge demand for raw materials such as iron ore, copper and coal.
Mr Xiong outlined their plans to expand from their core aluminium business, which has struggled to make profits, into a global mining house.
He said he was hunting for high-grade copper, bauxite, iron ore and coal resources, the minerals that China needs to fuel its urbanisation. “Our target areas are mainly countries next to China, for example south-east Asia, Mongolia and Central Asia,” said Mr Xiong.
High commodities prices have made mining assets round the world highly coveted, just at the time when Chinese miners are seeking to enter the fray. “The competition is fierce, and there are many more failures than success stories,” admitted Mr Xiong, who also confirmed that Chinalco was keenly interested in Oyu Tolgoi, a copper and gold deposit in Mongolia that is being developed by Rio Tinto and Ivanhoe.
“We hope to contribute Chinalco’s expertise to the development and construction of this project because it is right on our border,” he said, mentioning processing and distribution in particular. The Chinese miner is also in discussions with a Mongolian state-owned company about potential resources projects.
Chinalco famously made a dawn raid on Rio Tinto shares in 2008, spending $14bn in a joint exercise with Alcoa to block takeover efforts by BHP. But the following year, Rio Tinto walked away from a $19.5bn investment offer from Chinalco at the last minute, much to the company’s chagrin.
Mr Xiong says holding shares in Rio has taught Chinalco a lot. “During negotiations we got a much better understanding of the rules and regulatory environment in Australia.” As global mining assets become more valuable, resource nationalism has also surged, and Chinese miners are particularly vulnerable. Chinalco is investing $1.35bn in a joint iron ore project with Rio to develop the Simandou mine in Guinea. The company is also developing a large copper mine in Peru, although the site has been the subject of some criticism from residents.
Chinalco has seen its own share of disappointments there, including a failed $19.5bn investment in Rio in 2009. Chinalco is Rio Tinto’s largest shareholder, controlling nine per cent of the global miner, in a symbiotic relationship that has also seen the two companies sign joint ventures for projects in Guinea and in China.
Speculation has long centred on whether Chinalco might sell down its stake, acquired in a dawn raid during the contested $147bn bid for Rio launched by BHP Billiton, which ultimately failed. Mr Xiong said that “at present, we do not plan to increase or decrease our shares.”
“Through our purchases of Rio stock, we developed a deep understanding of Australian law, Australia’s stance and attitude towards its own resources, and Australian public opinion,” Mr Xiong said.
Chinalco is seeking to move into mining to take advantage of the commodities bull run that has been created by China’s huge demand for raw materials such as iron ore, copper and coal.
Mr Xiong outlined their plans to expand from their core aluminium business, which has struggled to make profits, into a global mining house.
He said he was hunting for high-grade copper, bauxite, iron ore and coal resources, the minerals that China needs to fuel its urbanisation. “Our target areas are mainly countries next to China, for example south-east Asia, Mongolia and Central Asia,” said Mr Xiong.
High commodities prices have made mining assets round the world highly coveted, just at the time when Chinese miners are seeking to enter the fray. “The competition is fierce, and there are many more failures than success stories,” admitted Mr Xiong, who also confirmed that Chinalco was keenly interested in Oyu Tolgoi, a copper and gold deposit in Mongolia that is being developed by Rio Tinto and Ivanhoe.
“We hope to contribute Chinalco’s expertise to the development and construction of this project because it is right on our border,” he said, mentioning processing and distribution in particular. The Chinese miner is also in discussions with a Mongolian state-owned company about potential resources projects.
Chinalco famously made a dawn raid on Rio Tinto shares in 2008, spending $14bn in a joint exercise with Alcoa to block takeover efforts by BHP. But the following year, Rio Tinto walked away from a $19.5bn investment offer from Chinalco at the last minute, much to the company’s chagrin.
Mr Xiong says holding shares in Rio has taught Chinalco a lot. “During negotiations we got a much better understanding of the rules and regulatory environment in Australia.” As global mining assets become more valuable, resource nationalism has also surged, and Chinese miners are particularly vulnerable. Chinalco is investing $1.35bn in a joint iron ore project with Rio to develop the Simandou mine in Guinea. The company is also developing a large copper mine in Peru, although the site has been the subject of some criticism from residents.
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