CHINALCO Seek Rare Earth Project in Guangdong

CHINALCO and the Qingyuan municipal government in Guangdong will sign a framework agreement at the beginning of 2011 to jointly tap local rare earth resources,suggesting that CHINALCO is moving towards strategic transformation and structural adjustment.

According to an official statement by the Qingyuan government,China boasts 80% of the world's total rare earth resources; Guangdong has 50% of rare earth of these,while Qingyuan owns 35% of Guangdong's rare earth.This indicates that Qingyuan is rich in rare earth resources.He Binghua,Deputy Party Secretary of Qingyuan,said that Qingyuan contacted Yunnan Copper Group (hereinafter referred to as Yunnan Copper) initially and both sides commenced negotiations in 2006.After CHINALCO acquired Yunnan Copper, CHINALCO naturally became the new negotiator.Today,the subject of negotiation is not just limited to the development and utilization of rare earth resources.

According to He,following the acquisition of a copper mine in Peru,CHINALCO plans to roughly smelt ores there before transferring them to China,and building a large-scale copper production base in a coastal part of China.The Qingyuan municipal government required CHINALCO to build a copper production base with a total capacity of 500,000 tons in Qingyuan in exchange for cooperation and development of rare earth in Qingyuan.Meanwhile,the Qingyuan municipal government also required CHINALCO to fulfill its commitment to building a rare earth deep-processing industrial chain and supporting the system in Qingyuan.

He said,compared with the copper project,Qingyuan is paying more attention to the rare earth project being negotiated with CHINALCO.According to He,relevant staff including Ren Xudong (deputy general manager of CHINALCO) have visited Qingyuan a number of times to investigate the local rare earth industry and conduct negotiations.Today,CHINALCO's 200,000-ton copper project in Qingyuan is essentially complete and will go into operation soon.

He said that Qingyuan has approved the framework agreement.Currently,both sides are going through relevant procedures according to China's industrial and environmental protection policies,and the agreement will be signed so long as it receives approval at the executive meeting of Qingyuan's municipal government.He estimated that both sides would sign an agreement at the beginning of the year,and the project would ultimately generate output of more than RMB 100 billion.

In 2010,it was critical for CHINALCO to turn losses into profits and carry out a strategic transformation and structural adjustments.In 2010,CHINALCO made a big push into the copper,iron and rare earth markets through its control of Yunnan Copper and planning work in the rare earth business.

In the area of rare earth,light rare earth resources in northern China are mainly controlled by REHT,while southern China has abundant heavy rare earth resources.In 2010,rare earth tycoons frequently sought these resources.To this extent,Jiangxi Copper Corporation increased its investment in Sichuan,while Guangdong Rising Nonferrous Metals Co.,Ltd did the same in Guangdong,Guangxi Nonferrous Metals Group in Guangxi.Meanwhile,China Nonferrous Metals Group expanded in areas that are rich in rare earth resources including Guangdong and Guangxi.

CHINALCO were also present in the scramble for rare earth resources in southern China.In September 2010,CHINALCO entered Jiangxi's rare earth industry in a high profile way,erecting a new platform for developments in rare earth by increasing its investment in Ji-angxi Rare Earth & Rare Metals Tungsten Group Holding Co.,Ltd (JXTC).In October 2010,Xiong Weiping,General Manager of CHINALCO,discussed with a member of the Guangxi Autonomous Region government on the joint development of rare earth resources.CHINALCO has begun to compete with NFC in Jiangxi and Guangxi,and is quietly changing its old approach in the area of rare earth.

An unnamed analyst said that JXTC does not currently directly own rare earth resources,but it is very likely that CHINALCO,through a series of operations,will ultimately obtain rare earth resources by virtue of its influence in Jiangxi and the government it relies on.

According to Xiong Weiping,structural adjustment is key to the long-term development of CHINALCO.Only through structural adjustments can CHINALCO realize a strategic transformation and recreate a new competitive edge.CHINALCO will adjust and optimize the aluminum sector,prioritize the copper sector,develop rare earth selectively,and focus on major mineral resources in great demand in China.In addition,CHINALCO has set a new goal,namely turning itself into a top 10 global mining company over the next 3-5 years.

It is notable that besides making inroads into the rare earth market,CHINALCO has been active elsewhere recently.For example,since December 2010,CHINALCO has inked strategic cooperation framework agreements with the China Three Gorges Group and CNR in Beijing.According to an insider at CHINALCO,besides exploring combined aluminum-power modes and making inroads in the high speed rail market through these two deals,CHINALCO will also provide Commercial Aircraft Corporation of China,Ltd.and Airbus with supporting products.According to Li Fengyi,General Manager of CHINALCO Southwest Aluminum,CHINALCO and Airbus have reached a consensus that Southwest Aluminum will serve as a supplier for the Airbus A350.Further news is set to be announced soon.