Chinalco to Take Mining Unit Private, Pay 32% Premium

  • Chinalco Mining buyback allows parent to support Peru project
  • Company plans to pay HK$1.39 per share to existing investors

Aluminum Corp. of China will pay shareholders a premium to buy their stock in its Hong Kong-listed unit Chinalco Mining Corp. International as it moves to take the division private.

The HK$1.39 per share offer is a 32.4 percent premium to the unit’s closing price of HK$1.05 on Sept. 14, its last trading day, or 33.7 percent more than the average price over the last 30 trading days, the country biggest state-owned aluminum producer known as Chinalco said in a statement to the Hong Kong stock exchange on Friday. The stock, suspended since Sept. 15, will resume trading on Sept. 26, it said.

The move to privatize CMC will make it easier for Chinalco to raise funds for its unit’s Toromocho copper mine in Peru, which started operations in December 2013. The mine has had its revenue squeezed by falling copper prices, inefficient operations and sporadic worker strikes.

Copper prices on the London Metal Exchange dropped 43 percent from January 2013, when CMC started trading in Hong Kong, to Sept. 14, according to Chinalco.

“This has had a negative impact on the trading prices of CMC shares, and has also decreased the ability of CMC to raise equity funding for operations,” it said.

CMC approved a $1.32 billion expansion for the Toromocho project in June 2013 to improve operational efficiency. “However, as at the announcement date, a substantial part of such future capital expenditure remains unfunded,” according to the statement.

By privatizing CMC, Chinalco will be able to exercise “greater flexibility in reorganizing the capital structure of CMC and in increasing funding to CMC,” according to the statement. The proposal would “also provide current shareholders with a reasonable exit of their investment in CMC that is attractive in light of current market conditions,” it said.

(Corrects name of parent company to Aluminum Corp. of China, or Chinalco.)
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