Chinalco may increase Rio Tinto stake, despite substantial drop in profits

A steep decline in profits has China¡¯s largest aluminum producer cutting back domestically, but still pondering increasing its ownership of Rio Tinto.

Despite a 65% drop in profits, the CEO of the Aluminum Corp of China (Chinalco) said the company may increase its minority stake in Rio Tinto under the right market conditions.

Chinalco reported a profit drop of over 65% as a result of high production costs, output disruptions and oversupply in the market.

Xiao Yaquing, chairman and CEO, told journalists, "Chinalco will postpone the completion of some projects and reassess new projects to tighten control on expenditure and ensure sufficient working capital.

Xiao said the company will increase the production of domestically-mined bauxite ore to 50% of the total material resources from the current range of 25 to 32%, in order to reduce Chinalco's reliance on imports..

Chinalco is also investigating a number of power projects which should increase its power generation capacity from 20% to 50%.

The company also estimated that total domestic output of electrolytic aluminum this year is expected to increase 15.4% to 14.5 million tonnes, which would exceed the projected demand of 14 million tonnes by a small margin.

RIO TINTO STAKE

Meanwhile, Xiao said the company may increase its minority stake in Rio Tinto under the right market conditions,

In January Chinalco bought 12% of Rio's London-listed shares, or 9 percent of Rio Group's total equity, jointly with U.S. aluminum giant Alcoa.

Xiao also emphasized that Chinalco will not buy into BHP Billiton.

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