Chalco shares rise on investment in Guinea iron ore project

Aluminum Corp. of China Ltd., the nation’s biggest producer of the metal, rose in Shanghai trading after agreeing to buy a stake in Rio Tinto Group’s Simandou iron ore project in Guinea.

Chalco, as the Beijing-based company is known, rose as much as 10 percent in Shanghai, and traded up 7.5 per cent to 10.98 yuan at 9:31 Am after resuming trading today. The company yesterday agreed to pay $1.35 billion for a 44.65 per cent stake by funding development over the next two to three years.

Chalco, facing a 12 per cent drop in aluminum prices, will benefit from tapping what London-based Rio has said is the world’s top undeveloped iron ore deposit. The project could be worth about $9.5 billion, according to UBS AG.

“This news should be positive for Chalco shares,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co. “Chalco’s profit has dropped sharply and last year it had a loss. The Simandou iron ore assets may give investors a positive profit expectation, even though it will be some years later.”