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Chinese take $452 million stake in Alumina

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AAP

2013-02-14

Chinese government-owned CITIC has taken a 13 per cent stake in Alumina for $452 million, sending shares in the smelter investor to their highest level in almost a year.

But enthusiasm for the stock eased later on Thursday, as analysts said the deal would not allow CITIC to move towards controlling Alumina's prime assets in Victoria.

At 1428 AEDT Alumina shares were 12 cents, or 9.8 per cent, higher at $1.32.

The company's shares added 11.6 per cent to reach its highest level since March 2012 at 1044 AEDT.

Under the deal, CITIC will buy more than 366 million new Alumina shares, which will equate to just over 13 per cent of Alumina's total share base.

Alumina said the Chinese government-owned investment firm would be a strategically aligned and financially strong long-term investor.

"CITIC's investment demonstrates their confidence in the alumina industry and their understanding of Alumina Ltd's unique position in the global market," Alumina chief executive John Bevan said in a statement.

Proceeds of the share sale will be used to reduce debt.

Melbourne-based Alumina's only earning asset is its 40 per cent stake in Alcoa World Alumina and Chemicals (AWAC), with Alcoa holding the controlling remaining 60 per cent.

AWAC owns aluminium smelters at Portland and the struggling Point Henry plant, near Geelong, both in Victoria.

CMC Markets analyst Michael McCarthy said CITIC's stake appeared to be more of a long-term investment than a strategic stake in the AWAC project.

"They don't have a majority control over the asset so they wouldn't be in a position to acquire it or run it even if they do take Alumina over," Mr McCarthy said.

"The market reaction appears to be suggesting this is a strategic stake."

CITIC's investment was a classic counter-cyclical move by the Chinese.

"People must have been speculating that CITIC was looking at upping its stake."

Aluminium is one of the world's lagging commodities, largely due to the power inputs required to refine bauxite to alumina and to aluminium.

Falling aluminium prices and the high Australian dollar have put Alumina under financial pressure, swinging to a loss of $US14.6 million ($A14.19 million) in the first half of calendar 2012.

China's overproduction of aluminium has driven down prices that were above $US3,000 a tonne before the global financial crisis and were trading around $US2143 a tonne on Thursday.

Weaknesses in the global economy in 2012 have hurt demand for aluminium used in products such as aircraft, cars, drink cans, the construction industry and other appliances.

Alumina, which is among Australia's top 100 companies by market capitalisation, will release its results for the full year on February 21.