February 4, 2008 / 8:53 AM / 12 years ago

UPDATE 2-RUSAL, China Power to build plants in China, Guinea

(Releads, adds analyst comment, background)

By Aleksandras Budrys

MOSCOW, Feb 4 (Reuters) - United Company RUSAL, the world’s largest aluminium producer, said on Monday it will partner China Power Investment Corp (CPI) in building a 500,000-tonne smelter in western China and a bauxite and alumina complex in Guinea.

The deal gives UC RUSAL, majority owned by Russian billionaire Oleg Deripaska, a foothold in China’s fast-growing aluminium market, already the world’s top consumer and producer of the light metal used in drinks cans, cars and construction.

“It is important that RUSAL fixes its presence in China, which is the largest aluminium market,” said Alexander Pukhayev, metals and mining analyst for Deutsche Bank in Moscow.

“It’s good that RUSAL will also secure energy supplies, as China’s situation in the electricity sector is not as good as Russia’s,” Pukhayev said.

UC RUSAL said in a statement it had signed a memorandum of understanding with CPI, a major Chinese energy firm, giving it 49 percent of a smelter in Qinghai province that will have capacity to produce at least 500,000 tonnes a year of aluminium.

The smelter will be supplied with energy from CPI’s hydroelectric power facilities on the Yellow River.

CPI would also own 49 percent of a new bauxite and alumina complex in Guinea, which will have capacity of up to 2.8 million tonnes of alumina per year.

UC RUSAL and CPI will finance the projects in proportion to their ownership and will create a working group to conduct an audit and feasibility study. UC RUSAL said the study is slated for completion by mid-2008 and the project culd start in 2009.

“Joining forces with one of China’s largest energy corporations is an important move in realising UC RUSAL’s strategy of strengthening the company’s presence in China,” UC RUSAL Chief Executive Alexander Bulygin said.

CHINESE PRESENCE

UC RUSAL was created in March 2007 through the merger of Russian aluminium major RUSAL, smaller domestic rival SUAL and assets belonging to commodities trader Glencore [GLEN.UL].

The company accounts for 12 percent of global aluminium output and 15 percent of intermediate product alumina.

It does not currently own any smelters or alumina refineries in China. It does, however, own a plant in Shanxi province that produces cathodes, components of the electrolytic cells used in aluminium production.

In Guinea, a country rich in bauxite, UC RUSAL owns mining firm Compagnie des Bauxites de Kindia as well as the Friguia alumina refinery. It also owns the Dian Dian bauxite deposit. (Reporting by Aleksandras Budrys; editing by Michael Roddy)

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