China’s rapid economic development and industrialisation has led to increased demand for copper. To take advantage of this, Chinalco has expanded its copper business through acquisitions to secure copper ore supplies, increasing geographic diversification and achieving a vertical integration in the extraction, processing and fabrication of copper products.
In 2007, Chinalco acquired 49% of Yunnan Copper Ltd (Group), the third largest producer of copper in China, for RMB 9.5 billion (US$1.4 billion), significantly increasing its copper smelting production capacity.
In the same year, Chinalco successfully acquired 100% of Peru Copper Inc for approximately US$860 million and in doing so obtained development rights to the Toromocho mining project in Peru. The resource of copper metal is estimated to be over 12 million tonnes. The acquisition of the rights to the Toromocho project has secured significant future copper ore supplies for Chinalco. This acquisition provides Chinalco with a major competitive advantage over other Chinese copper smelters as it will help alleviate the bottleneck that exists in the supply of copper ore in China.
In addition, Chinalco has acquired 80.99% of Luoyang Copper Co Ltd and 66.67% of Chinalco Daye Copper Plate & Strip Co Ltd to strengthen its downstream fabrication business. These acquisitions, together with Chinalco's acquisition of 44.14% of Shanghai Copper Co Ltd, form the key operating entities within Chinalco’s Copper Business Unit.
In 2007, Chinalco produced approximately 135,000 tonnes of copper concentrate, approximately 464,000 tonnes of copper cathode and approximately 255,000 tonnes of fabricated copper products.
Chinalco’s Copper Business Unit also produces gold and silver which are valuable co-products of copper extraction.
Chinalco is focused on the following to further expand the Copper Business Unit:
Chinalco has established vertical production capacities from upstream copper mining, to processing and downstream fabricated products to realise integration synergies in its Copper Business Unit. The acquisition of Peru Copper Inc, which will secure the supply of copper ore to Chinalco’s smelters, underpins Chinalco’s vertical integration strategy.
Chinalco believes that economies of scale are the key competitive advantage to succeed in the copper industry. Chinalco aims to expand its copper operations through global partnerships and industry consolidation. In terms of copper ore supply, Chinalco now owns the development rights to Toromocho copper mine, which in Chinalco’s view is one of the highest quality undeveloped copper mines in the world. Chinalco expects to invest US$2.15 billion in Toromocho and expects to achieve an initial planned annual capacity of 250,000 tonnes. In addition, Chinalco’s strategic investment in Yunnan Copper Ltd has expanded its copper smelting capacity.
Chinalco seeks to differentiate itself in the copper industry as a leader in technology. Chinalco’s copper smelting furnaces have been built with cutting-edge ISA smelting technology.
Luoyang Copper Co Ltd, a subsidiary of Chinalco, utilises sophisticated copper processing equipment in its copper smelters. Luoyang Copper Co Ltd also owns a research centre which undertakes research and development in copper smelting technologies. The Luoyang Nonferrous Metals Fabrication Design & Research Institute is a leading engineering design and technical services institute in downstream nonferrous metals fabrication in China.