Chalco to Privatize Chinalco Mining Corporation

Chalco to Privatize Chinalco Mining Corporation
Cathedral of Huancayo, Peru. Source: Wikimedia

Days after a similar announcement by China Xingfa, state-owned Aluminium Corporation of China (Chalco) filed plans with the Hong Kong Stock Exchange proposing to privatize its subsidiary Chinalco Mining Corporation International (CMC).

Chalco is offering HK$1.39 per share, which is roughly one third above the stock’s recent price. The firm suspended trading on September 15, when it was selling at a price of HK$1.05. The stock resumed trading on Monday.

According to the report, the privatization move is to help raise money for its Toromocho copper mine in Peru, which first opened three years ago. The mine has been plagued by inefficient operations, striking workers, and the overall drop in copper prices around the globe. Chalco points out that copper prices on the LME have fallen 43% since CMC began trading on the Hong Kong Stock Exchange in January 2013.

“This has had a negative impact on the trading prices of CMC shares, and has also decreased the ability of CMC to raise equity funding for operations,” the firm said in its filing.

CMC planned to undertake a US$1.32 billion expansion for the mine in order to improve operational efficiency. “However, as at the announcement date, a substantial part of such future capital expenditure remains unfunded,” the statement said.

Privatizing CMC will allow Chinalco to exercise “greater flexibility in reorganizing the capital structure of CMC and in increasing funding to CMC,” according to the statement. The proposal went on to specify that such a plan would “also provide current shareholders with a reasonable exit of their investment in CMC that is attractive in light of current market conditions.”

Aluminum Corporation of China (Chinalco) is a state-backed holding company established in 2001 to be the People’s Republic of China’s primary aluminium producer. It is the parent company of Aluminum Corporation of China Limited (Chalco), China’s sole alumina producer, and the world’s fourth-largest aluminium producer.