Citic Group Corp., China’s largest state-owned investment company, will pay about A$452 million ($468 million) for a stake in Alumina Ltd., partner in the world’s biggest alumina business. Alumina’s shares soared.
Citic, through its Citic Resources Holdings Ltd. and Citic Ltd. units, will take a 13 percent stake by agreeing to purchase about 366 million new shares at A$1.235 each, 3 percent higher than Alumina’s close yesterday, the Melbourne-based company said today in a statement.
Alumina climbed to the highest in almost a year in Sydney trading, signaling some investors expect Citic may seek a takeover. The Australian company’s partner, Alcoa Inc., last month forecast global aluminum demand growth will accelerate to 7 percent this year as China’s economic rebound drives demand for cans, cars and buildings.
“The movement in the Alumina share price today probably suggests that the market is thinking” there’s the possibility of a takeover, said Gavin Wendt, a director at Mine Life Pty., who doesn’t expect a bid. “More than anything else it tells us that maybe we’re getting near the bottom of the market.”
The shares rose 7.5 percent to A$1.29 at market close, their highest since March 2012.
Aluminum for delivery in three months has risen 3.6 percent this year on the London Metal Exchange to $2,148 a metric ton at 4:49 p.m. Sydney time, up from last year’s average of $2,052. The metal will rise for at least the next three years, to $2,200 in 2014, $2,250 in 2015 and $2,500 in 2016, according to median price forecasts compiled by Bloomberg.
China’s Demand
Demand in China, the world’s largest aluminum user, will climb 11 percent this year to 23 million metric tons as stimulus spending announced by the nation’s new leadership starts to be felt, Alcoa Chief Executive Officer Klaus Kleinfeld said last month. He also forecast consumption growth in Brazil, India and Russia.
China’s alumina imports almost tripled to 5 million tons in 2012, according to monthly data compiled by Bloomberg.
“They’re perhaps just positioning themselves to benefit from what they think may be a recovery of the sector for this year and next,” said David Lennox, a resource analyst at Fat Prophets in Sydney.
Alumina jointly owns the Alcoa World Alumina & Chemicals venture with Alcoa, the largest U.S. aluminum producer. AWAC produces about one-quarter of the world’s alumina, which is refined into aluminum.
Chinese companies announced $61.9 billion of mining and energy acquisitions last year, according to data compiled by Bloomberg, including an agreed takeover of Canada’s Nexen Inc. by Cnooc Ltd., China’s biggest offshore oil and gas producer. Board Seat
“The board regards aluminum as a key strategic commodity and Alumina has significant interests in key assets,” Hong Kong-based Citic Resources said in a separate statement.
Flagstaff Partners Pty is advising Alumina and ANZ Corporate Advisory is advising Citic.
Citic Resources Chief Executive Officer Chen Zeng will join Alumina’s board of directors. The Chinese company’s first Australian investment in 1986 was in AWAC’s Portland Aluminium Smelter in Victoria, according to the statement. It now owns 22.5 percent of the smelter.
Citic’s investments in Australia include a 7 percent stake in Peabody Energy Corp.’s Coppabella and Moorvale coal mines.
“This secures a strategic, long-term investor at a premium to our recent share price,” Alumina Chief Executive Officer John Bevan said in the statement.
The investment has been approved by Australian Treasurer Wayne Swan and by China’s National Development and Reform Commission.
AWC Price at posting:
$1.29 Sentiment: Buy Disclosure: Held
(20min delay)