(Yicai) May 22 -- Shares of Aluminum Corporation of China jumped after the aluminum producer, also known as Chalco, said it plans to invest about USD1 billion in building an alumina processing plant in Guinea. 

Chalco [SHA: 601600] closed 2.9 percent higher at CNY11.15 (USD1.64) a share in Shanghai today. Its Hong Kong-listed stock [HKG: 2600] gained 2.7 percent to end at HKD10.90 (USD1.39).

Chalco signed a supplementary agreement with the Guinean government yesterday, incorporating the new plant into the framework of a bauxite mine project in Boffa near the Atlantic coast, the Beijing-based firm announced today. The factory will have an annual production capacity of 1.2 million tons of alumina.

The project will also include a specialized port and other supporting facilities, Chalco said, without disclosing a construction schedule. 

Chalco will set up a project company in Guinea to oversee investment and construction, it noted. Under the supplementary deal, the government will will receive 5 percent of the project firm once the plant begins production, and that stake will not be diluted by later capital increases.

The government also has a one-time right to buy additional shares in the project company at fair market value, but its total stake cannot exceed 35 percent, Chalco said.

Chalco Guinea, the subsidiary that runs the Boffa bauxite mine, will gradually increase its supply of the raw material for aluminum to the plant and also raise the scale of bauxite exports as appropriate, its parent firm pointed out. 

The factory is Chalco's first overseas alumina production project. It will improve the firm’s industrial footprint, strengthen the bauxite-to-alumina chain in Guinea, and enhance its international operating capabilities, Chalco said.

Chalco and the Guinean government signed the original mining agreement in 2018, giving the Chinese company the mining rights to the Boffa North and Boffa South blocks. The project has about 1.75 billion tons of proven recoverable bauxite reserves and a designed mine life of 60 years. Phase one was designed for 12 million tons of bauxite a year, began production in 2020, and mainly supplies China.

Guinea’s 2024 mining law requires foreign miners to build local processing facilities or risk losing their mining rights and facing additional export tariffs. The government revoked 51 mining licenses last year, including six bauxite projects, because the holders failed to fulfill their local processing obligations

Editor: Martin Kadiev