Aluminum Corporation of China Ltd (NYSE:ACH) - Chalco to invest US$19.5 bn in Rio Tinto Group, increasing its stake to 1

On 12 February 2009, Aluminum Corporation of China Limited (Chalco) and Rio Tinto PLC (Rio Tinto) jointly announced that Chalco will be investing US$19.5 bn in Rio Tinto.

In return, Chalco will receive access to Rio Tinto¡¯s aluminum, copper and iron ore resources, and will increase its stake in Rio Tinto Group to 19%.

Going forward, considering Chalco¡¯s guidance, we expect to cut our estimates and target price in our next update report (as discussed in our company news alert dated 23 January 2009), therefore we maintain our HOLD rating. We will reassess our common stock rating for Chalco after the company releases its FY 2008 results in the coming weeks.

Even though the ADR target price does not support a HOLD rating, we maintain our HOLD rating due to our fundamental outlook on the company.

Also, as the Hong Kong dollar is pegged to the US dollar, we do not anticipate a currency impact on the ADR over our investment horizon. We will reassess our ADR (1 ADR = 25 common shares) rating for Chalco after the company releases its FY 2008 results in the coming weeks.

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