By Wang Lan (China Daily)
Updated: 2008-03-19 11:13

Aluminum Corp of China Ltd, or Chalco, the nation's largest producer of the metal, said yesterday it will step up its overseas expansion after it bought a 12 percent stake in Rio Tinto Plc in February.

"This is just the starting point of our cooperation (with Rio Tinto)," Xiao Yaqing, chairman and CEO of Chalco, said.

"In 2008, the company plans to jointly invest in more overseas mining projects with international mining companies to ensure sustainable growth through more access to mineral resources," Xiao said in Shanghai yesterday.

Chalco also plans to spend 1 billion yuan on a 5 percent stake in a proposed project with AVIC I's Commercial Aircraft Co, Xiao said.

Chalco yesterday said its net profit for 2007 was 10.1 billion yuan, down 12.72 percent from a year earlier on higher production costs.

Related readings: Chalco to bid for parent's stakes in subsidiaries Chalco earnings hit by lower prices Rio Tinto's 2007 China sales forecast to surge 42.8% Chinalco, Alcoa to take 12% stake in Rio Tinto

Xiao said rising prices of bauxite ore and fuels used in alumina processing combined to push up manufacturing costs by 6.8 percent last year, which squeezed profit margins.

Chalco is set to acquire more local alumina processors, most of which are struggling as slim processing fees fail to offset the cost increase, Xiao said.

"It's a good time to merge with small alumina processors to expand Chalco's processing capacity in 2008," Xiao said. Chalco's processing capacity is expected to reach 1.09 million tons in 2008, largely through mergers and acquisitions.

Xiao said the company doesn't plan to adjust the alumina price, despite its continuous drop on domestic and global markets in the past two weeks.

"We don't think the recent price drop will continue for long," he said. He predicted aluminum prices will maintain an upward trend this year, as production costs and demand keep rising.

Chalco said it's also seeking opportunities to expand into other metals such as titanium and copper.

"It's difficult for a single metal producer to make significant growth in the face of international competition," Xiao said. "The industry trend is for aluminum producers to diversify their businesses," he said.