Chinalco to invest $1.5 bn in rare earth

Chinalco to invest $1.5 bn in rare earth

Aluminum Corp of China (Chinalco), the country’s top aluminium producer which is expanding to other metals, will take a majority stake in Jiangxi Rare Earth and Rare Metals Tungsten Group. State-owned Chinalco, keen to invest in rare earth, would use not less than $1.5 billion to help the Jiangxi firm develop rare earth resource in the next three to five years. The Jiangxi firm is one of China’s major tungsten producers and China is the world’s gest supplier of tungsten and rare earth. Chinalco is the parent of Chalco.
 

Rusal to issue yuan-denominated bonds

The promoters of United Company Rusal have kicked off a new marketing campaign for the heavily indebted aluminium company run by Oleg Deripaska. Reports say that Rusal is planning Russia’s first offering of bonds in China, spurred by McDonald’s Corp.’s debut sale in yuan. A roadshow to test whether the Chinese taste for McDonald’s will carry over to an appetite for Deripaska risk products is planned soon. For Hong Kong-based investors, this issue will be a great diversification play with significant yield pick-up, compared to the majority of local bonds.
McDonald’s has a current market capitalization of $80 billion and a net debt of $10.6 billion. Rusal’s market cap is $16 billion, and its net debt is $12.2 billion. McDonald’s revenues, earnings and profits dwarf Rusal’s by magnitudes of 2 to 3.


China set to take centre stage in gold market

The easing of restrictions on China’s gold imports should boost its influence on global bullion trade as Chinese investors turn to the open market to satisfy their hunger for the metal, the World Gold Council has said. Chinese gold demand is expected to show at least single digit percent growth this year at a time when high prices are curbing buying in other major physical markets like India, the WGC’s Far East managing director Albert Cheng said.
This is likely to mean the shortfall between Chinese supply and demand increases even further. “The Chinese government... used to be afraid of too much gold being imported into the country, because that meant a drain of US dollars. Now, this is nothing.” Moves announced in August by the People’s Bank of China to allow more Chinese banks to export and import gold mean the shortfall is increasingly likely to be met by gold bought on the global market, rather than domestically.
Chinese demand is the key driving force for a number of key commodities, such as copper, but its status as the world’s gest gold producer as well as its second gest consumer has meant its impact on the wider gold market has been muted. This could be changing, said the WGC, a gold industry lobby group.


Russia, China in deal on refinery, not gas

China and Russia have agreed to invest around $5 billion in a joint oil refinery in the Chinese port city of Tianjin, but once again they failed to agree on a long-awaited natural-gas supply deal. In a sign of closer energy ties between the world’s gest energy consumer China and energy superpower Russia, China National Petroleum Corp. and Russia’s OAO Rosneft agreed to build a 260,000 barrels-a-day refinery.

Last year, China secured 300,000 barrels a day in Russian crude supplies for the next 20 years in exchange for a $25 billion loan. And in August, China agreed to lend Russia an additional $6 billion in exchange for increased coal supplies for the next 25 years.
Russian officials had also been hoping for a breakthrough on plans to export natural gas to China, but the two countries failed to finalize negotiations that started in 2006. In 2006, Russia said it would supply natural gas to China via two pipelines, but no contract has been signed because the state-run enterprises in the two countries haven’t agreed on pricing.

Russia is seeking to diversify energy exports away from Europe to Asia’s growing economies. The failure to reach a natural-gas deal comes amid lower demand for Russian natural gas and falling market share in Europe—the key export market for state gas company OAO Gazprom. Analysts say China may not need to rely on natural gas from Russia as much as before. China started importing natural gas from Turkmenistan last year and is building new terminals to imports larger quantities of liquefied natural gas.


Petropavlovsk to list nonprecious metals unit on HKEx

London-listed mining and exploration company Petropavlovsk would list its nonprecious metals division on the Hong Kong stock exchange (HKEx), following an initial public offering (IPO). As part of the proposed listing process, the nonprecious metals division has now been reorganised under a new subsidiary, IRC Limited (IRC). Subject to the listing proceeding, it is expected that IRC will become the listed entity on the HKEx in October.
The nonprecious metals division comprises a mining business, which is focused on exploring for, developing and operating industrial commodity projects in the Russian far-east and the north-eastern region of China.
Petropavlovsk said that its board had considered a number of financing options and possible locations for a listing of IRC and has concluded that a listing on the main board of the HKEx was the most “appropriate and desirable”. The decision “reflects the location of IRC’s asset portfolio as well as proximity to IRC’s target customers, equipment suppliers and sources of capital,” the company added. n

(These are edited and abridged from items reported by news agencies and in newspapers.)