* 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 as much as 17 percent on news of the
share sale, spurred by 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.
"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.
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. Its
alumina imports nearly tripled in 2012 from the year before.
CITIC Resources, which already owns a direct 22.5 percent
stake in AWAC's Portland aluminium smelter, said in a statement
it considers aluminium a "key strategic commmodity".
An analyst said with bauxite supply likely to tighten by the
end of this decade, CITIC's move on Alumina could help it lock
in supplies down the track.
"For me it's a longer term strategic deal to secure supply.
Some big projects in West Africa are a bit shaky. Indian
deposits look like they will be relatively difficult to access.
The bauxite market is going to get tighter from about 2017,"
said ANZ commodities strategist Nick Trevethan in Singapore.
As it stands, the share sale to CITIC does not involve any
CITIC agreed to pay A$1.235 a share for the equity stake in
Alumina. Alumina's shares surged to a 14-month high of A$1.405
after the announcement and last traded up 8 percent at A$1.30,
outpacing the 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 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
Alumina was advised by Flagstaff Partners, and CITIC was
advised by ANZ Corporate Advisory.