Chinalco eying Mongolian copper, gold

This article comes from Dow Jones News Wires. The story is roughly in line with some talk inside industry circles in China, that Chinalco is considering getting out of primary aluminium. Given they are poorly placed with electricity pricing, and don’t seem to be able to bring Aurukun to reality, it may be no surprise if they do gradually migrate out of the shiny metal and into the red metal.

Aluminum Corp. of China is considering purchasing a direct minority stake in one of the world’s largest undeveloped gold-and-copper mine deposits, according to project partner Rio Tinto PLC.

Canada’s Ivanhoe Mines Ltd owns a 66% stake in the Mongolian Oyu Tolgoi project and has previously expressed interest in selling a minority stake to a second strategic investor. Rio Tinto PLC owns an indirect interest in the project through its 29.6% equity stake in Ivanhoe Mines.

Aluminum Corp., also known as Chinalco, “has indicated an interest” in acquiring a minority equity stake in Ivanhoe or a minority interest in the Oyu Tolgoi project, Rio Tinto said in a U.S. Securities and Exchange regulatory filing Wednesday.

“If any arrangement is agreed, it may be a bipartite or tripartite arrangement with” Ivanhoe and/or Rio Tinto, Rio Tinto added, saying the government of Mongolia would have to support any deal.

A Chinalco executive, who declined to be named, told Dow Jones Newswires that the company is committed to exploring investment in overseas projects and would like to deepen its cooperation with Rio Tinto, in which it holds a roughly 9% stake.

A Mongolian government official said the government hasn’t been consulted yet on any plans for a stake sale in the mine or Ivanhoe. Ivanhoe and the Mongolian government, which owns a 34% stake in the Oyu Tolgoi project, have the first right of refusal if either party wants to sell a stake.

Rio Tinto is also discussing plans with Ivanhoe to convert its indirect equity stake in the project “into a direct ownership interest,” Rio Tinto said.

Rio Tinto paid $393 million on June 29 to exercise warrants that increased the Anglo-Australian’s stake in Ivanhoe to 29.6% from 22.4%. Rio still has enough warrants to increase its stake up to 44%.

Rio Tinto has also had discussions about the project with numerous parties including the European Bank for Reconstruction and Development and The International Finance Corporation.

Rio Tinto intends to continue its discussions with Ivanhoe, Chinalco, the EBRD, the IFC and other third parties, including the government of Mongolia, the filing said.

An Ivanhoe spokesman declined to comment on the filing but referred to a May 21 statement that said that talks on financing were ongoing.