Aluminum Corp of China, the nation's largest producer of the metal, will weather the global credit crunch and economic slowdown with a cash hoard of as much as 60 billion yuan (US$8.8 billion), an executive said.
"All companies are making preparations to combat the financial turmoil and economic slowdown," Vice President Lu Youqing of the state-owned company known as Chinalco said by phone with Bloomberg News from Beijing yesterday. "We have between 50 billion and 60 billion yuan in cash, sufficient to weather the crisis."
Companies worldwide are seeking to secure credit as losses at financial companies crimped capital markets, and profits drop with the slowdown. Chinalco has lost 74 percent on the value of its biggest overseas investment, a stake in Rio Tinto Group.
"The government will continue to support Chinalco to grow bigger, so there shouldn't be any problem in fund raising if the company needs money to invest," Li Zhuiyang, an analyst at Citic Securities Co, said by phone from Shanghai yesterday. Aluminum Corp Of China Ltd, Chinalco's publicly traded unit, rose 9.4 percent to HK$3.49 (45 US cents) at 2:40pm in Hong Kong. The benchmark Hang Seng Index gained 2.5 percent.
Chinese stocks rose after the government on Wednesday cut interest rates by the most in 11 years to spur growth.
Chinalco and Alcoa Inc paid 7.2 billion pounds (US$11 billion) for a 9 percent stake in London-based Rio Tinto, the world's third-largest mining company, in February. The value of the holding has slumped 74 percent. Chinalco has previously said it may raise its stake to 14.99 percent.
BHP Billiton Ltd, the world's largest mining company, this week abandoned a US$66 billion bid for Rio Tinto on concern it may take on too much debt.
Third-quarter earnings at Chinalco's listed unit, also known as Chalco, slumped 93 percent. JPMorgan Chase & Co expects it to post a loss for the fourth quarter.
Chairman Xiao Yaqing is curbing expenditure and cutting costs to counter a 25 percent drop in the metal price this year.
(Shanghai Daily November 28, 2008)
