Chinalco spends RMB 100 billion on Integrating Non-ferrous Resources in Yunnan

On May 27,Chinalco,the controlling shareholder of Aluminum Corporation of China(CHALCO),signed a cooperation agreement with Yunnan Provincial People’s Government to further expand strategic cooperation with Yunnan Province in depth and breadth.

As other parties to the cooperation,the three major metallurgical industry listing platforms in Yunnan Province-Yunnan Copper,Yunnan Aluminum and Chihong Zn&Ge,issued an announcement in the morning of May 28 that a"Cooperation Agreement"was signed between the Yunnan Government and Chinalco.The two parties intend to cooperate through Aluminum Corporation of China,a whollyowned subsidiary of Chinalco,in the forms including but not limited to capital increase and transfer. According to the cooperation arrangement,the State-owned Assets Supervision and Administration Commission of Yunnan Provincial People’s Government signed with Chinalco on the same day the“Management Agreement for the Transitional Period of Yunnan Metallurgical Group Co.,Ltd.”

CBN reporterlearnedfrom Chinalcothat Chinalco regards this strategic cooperation of the scale of 100 billion yuan as a major measure for the structural reform of China’s non-ferrous metal supply side.As the most important strategic reorganization of the nonferrous metals industry in China,it will also bring a major change in the pattern of the global non-ferrous metals industry.

Atpresent,itseems thatthe operating conditions of the three listed platforms in Yunnan Province in the first quarter have been largely differentiated.In the first quarter of 2018,Chihong Zn&Ge reached operating revenue of 4.907 billion yuan,with a net profit of 405 million yuan and a year-on-year increase by 38.83%.Yunnan Copper’s operating income in the first quarter was 9.292 billion yuan,with a net profit 117.8 million yuan and a year-onyear increase by 75.73%.Yunnan aluminum in the first quarter saw a net profit of-104.7 million yuan,-188.80% on a year-on-year basis,when operating income increased by 8.32%to 5.124 billion yuan.

The market is cautious about this cooperation.The stock pricesofYunnan Aluminum,Yunnan Copper,and Chihong Zn&Ge rose by nomorethan1%,whiletheAluminum Corporation of China appeared green at the opening.

According to the announcement,upon cooperation the final shareholdings of Chinalco and the Yunnan Provincial Government in Aluminum Corporation ofChinawill,in principle,be 58%and 42%respectively.The assets included in the scope of cooperation of the Yunnan Provincial Government and Chinalco are mainly the equities of Yunnan Metallurgical Group and Copper Corporation of China respectively.

The announcement of Chihong Zn&Ge and Yunnan Aluminum shows that if the above cooperation issuccessfully completed,the actual controller of the company will be changed from the State-owned Assets Supervision and Administration Commission of Yunnan Provincial People’s Government to the State-owned Assets Supervision and Administration Commission of the State Council.This means that Chinalco will once again take the Yunnan Metallurgical Group back into the territory after it successfully aligned with China Yun Copper Group.Up to now,the controlling shareholder and actual controllerofthe company have notyet changed.

The reporter confirmed with relevant parties at Aluminum CorporationofChinathatthe cooperation agreement signed this time will not lead to changes in the actual controller of the company and will not have a significant impact on the company’s day-to-day production and operations.

In fact,Chinalco has shown signs of expansion in Yunnan.Since the first half of 2015,Chinalco and Yunnan Province have conducted severalin-depth meetings on cooperation issues.In December 2015,the two sides signed a strategic cooperation agreement in Beijing and reached a consensus on cooperation in strengthening the industry of copper,lead,zinc and precious metals.In 2016,as an important platform company for the copper sector of Chinalco,Copper Corporation of China placed its headquarters in Kunming,the provincial capital of Yunnan.

In April of last year,Chinalco signed a strategic cooperation agreement with Yunnan Metallurgical Group.Since then,Chinalco’s top management team has met with leaders of Yunnan Province twice,reaching consensus on various forms of cooperation.In August 2017,Governor of Yunnan Province Ruan Chengfa met with Ge Honglin,the chairman of Chinalco Group,in Kunming.The two parties exchanged ideas on furthering their respective advantages,expanding the scope ofcooperation,and strengthening cooperation in non-ferrous metals research and development,resource integration,industrial transformation and upgrading,transportation infrastructure construction,building characteristic towns and poverty alleviation,etc.

On January 31 this year,Yunnan Aluminum and Chihong Zn&Ge issued announcements,saying that the State-owned Assets Supervision and Administration Commission of Yunnan Provincial People’s Government planned a cooperation with Aluminum Corporation of China by offering the control over Yunnan MetallurgicalGroup.Yunnan Copperalso issued an announcement,saying that Chinalco and the State-owned Assets Supervision and Administration Commission of Yunnan Provincial People’s Government will deepen the cooperation.