Commodity Stocks: Government Aluminum Miner Buys Canadian Copper Miner
By Ann Sosnowski
Aluminum Corp. of China (ACH:NYSE), also known as Chalco, is buying Peru Copper (CUP:NYSE), which is based in Canada but mines copper in Peru. Chalco, a government-owned Chinese aluminum miner, is paying $792 million for one of the last remaining independent copper companies. This values Peru Copper at about $6.22 per share, a 21% premium over its most recent trading price.
Just like aluminum, nickel and practically every other base metal, China is in desperate need for copper. Adding a copper miner to its government-run aluminum miner’s coffers solves their supply problem in a hot second!
See, Peru Copper currently owns the Toromocho copper project, which is expected to be one of the biggest copper mines in the world, supplying 300,000 tons of the metal per year by 2010.
Commodity Stocks: Chinese Company Profits From Copper and Aluminum Demand
Comparatively, China used 4 million metric tons of copper, 22% of the world’s supply, just last year. This is a usage increase of 10% over just the last 10 years. The demand for copper will continue based on simple supply and demand spurred by Chinese infrastructure projects, including the Olympics.
With aluminum demand expected to double by 2020, much of it led by China’s growing economy, Aluminum Corp is in a spot to make a lot of money. Not only will the aluminum miner capitalize on aluminum demand worldwide; now it will add profits from copper demand to its growing bottom line.
Current readers of Diligent Investor are showing gains of 15% already on ACH on the heels of its acquisition announcement for Peru Copper.
I anticipate more merger activity from this state-controlled miner as its home country is fueling demand for base metals and building materials. In fact, I still consider it a buy at current levels.
Ann Sosnowski
Editor, Diligent Investor
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