* CITIC pays 3 pct premium for strategic stake
* CITIC stake capped at 15 pct for two years
* Alumina to use funds raised to pay down debt
* Alumina shares soar 17 pct
By Sonali Paul
MELBOURNE, Feb 14 China's state-owned CITIC
Group has bought a A$452 million ($467 million) stake
in Australia's Alumina Ltd, giving it an interest in
the world's largest alumina business at a time when China has
grown more dependent on alumina imports.
Alumina's shares jumped 17 percent after the share sale was
announced, on relief that the company has been shored up by a
strategic investor, allowing it to pay down debt as the
aluminium industry struggles with weak prices.
"This takes all the pressure off them," said Hayden
Bairstow, an analyst at CLSA.
Alumina owns 40 percent of Alcoa World Alumina & Chemicals
(AWAC), the world's top producer of alumina, in a joint venture
with U.S. aluminium giant Alcoa.
CITIC, through its listed arm CITIC Resources Holdings
and another subsidiary, will own 13 percent of Alumina
following the placement, in a deal that has already won approval
from the Australian and Chinese governments.
Under the terms of the agreement, the Chinese firm will be
allowed to raise its holding to 15 percent and is capped at that
level for two years. Beyond that it will be allowed to raise its
stake to just below 20 percent.
Alumina said it would use the funds raised to pay down debt
at a time when the aluminium industry has been struggling with
rising energy costs and weak prices, largely due to
unanticipated growth in aluminium production in China.
China has had to increase imports of alumina after Indonesia
last year clamped down on exports of bauxite, which is used to
produce alumina, which is then turned into aluminium.
"CITIC's investment demonstrates their confidence in the
alumina industry and their understanding of Alumina Limited's
unique position in the global market," Alumina Chief Executive
John Bevan said in a statement.
CITIC agreed to pay A$1.235 a share for the stake.
Alumina's shares surged to a 14-month high of A$1.405 after
the announcement and last traded up 12 percent at A$1.34 in a
flat broader market.
The struggling aluminium industry won another fillip this
week when Rio Tinto agreed to keep open its
Australian Gove alumina refinery, after securing gas supply from
the Northern Territory government, crucial to cutting costs at
the loss-making plant.
CITIC Resources already owns a direct 22.5 percent stake in
AWAC's Portland aluminium smelter.
It previously owned a 25 percent stake in Macarthur Coal,
and played a pivotal role in extracting a solid premium when the
Australian miner was taken over by U.S. firm Peabody Inc
in 2011, booking a A$400 million profit on that investment.
Alumina was advised by Flagstaff Partners, and CITIC was
advised by ANZ Corporate Advisory.