Mining companies around the world have so far in 2009 raised nearly USD 60bn, all of it completely outside any banking system/s, but to date none of the capital has come in by way of an IPO (initial public offer), which entails a new listing. Today China Zhong Wang, the aluminium division of holding company Liao Ning Zhong Wang Group, started marketing for its planned 8 May listing in Hong Kong, that would involve raising up to the equivalent of USD 1.6bn, equal to 26% of its enlarged capital.If the stock lists at that valuation, its full value would be USD 6.6bn, which would rank China Zhong Wang as the third most valuable listed specialist aluminium stock, after

Chalco, with a market value of USD 15.6bn, and Alcoa, which currently carries a market value of USD 9bn. Russia's Evraz, which, like Alcoa, tends to rank itself as the world's biggest aluminium entity, remains unlisted. Then again, Rio Tinto Alcan markets itself as the global leader in the aluminium industry.Should China Zhong Wang succeed in its IPO, at the kind of price level it is suggesting, this would be the world's biggest IPO in the year to date, across all global equity sectors. Aluminium, however, is the least recovered of the base metals, given a stubborn composite refusal by the global sector to amend supply in line with changed demand conditions.METAL PRICES

Industrial, USD/lb

Low*

High*

Current

From low

Copper

1.28

4.06

2.18

70.6%

Aluminium

0.58

1.53

0.67

16.2%

Lead

0.39

1.30

0.71

82.7%

Tin

4.40

11.57

5.56

26.3%

Nickel

4.01

13.47

5.82

44.9%

Zinc

0.47

1.08

0.71

50.0%

* 12-month

Times may however be changing in the chain of aluminium production, where ores (mainly bauxite) are mined, refined into alumina (aluminium oxide), and then smelted into aluminium. Rio Tinto recently announced significant cutbacks and curtailments in its alumina (aluminium oxide) division, given that current demand for aluminium remained poor.Rio Tinto Alcan Bauxite and Alumina president Steve Hodgson was quoted as saying that despite major industry wide production cutbacks, aluminium stocks continue to increase. Even with alumina industry capacity cuts equivalent to 21m tonnes per year since the beginning of the crisis, including cuts of 12m tonnes made since January, there is still little improvement in the alumina price. At current prices around 70% of the industry is currently operating at a financial loss.Outside of China, debt remains a big theme for a number of aluminium entities. Rusal in February announced that it had won a standstill reprieve on just over half of its USD 14.00bn in debt. Alcoa was forced to stage a huge and heavily dilutive USD 1.1bn capital raising exercise during March, involving the sale of both equity and convertibles, while Rio Tinto, sitting on massive net debt of USD 38.17bn on 31 December 2008, has been selling off choice assets and is also controversially involved in attempting to raise USD 12.3bn from smaller rival Chinalco by selling equity stakes in some of Rio Tinto's most prized assets. Chinalco holds 38.6% of Chalco, and also 26.6% of listed Yunnan Copper.Rio Tinto also wants to sell convertibles worth USD 7.2bn to Chinalco. During 2007, Rio Tinto famously bought Alcan for USD 38bn in hard cash. Signs of consolidation in the sector have included the February 2008 purchase of some 12% in Rio Tinto, jointly by Chinalco and Alcoa.BHP Billiton, one of the world's lowest cost aluminium producers, has shown in a frank and convincing presentation how China has become the world's biggest country producer of aluminium (by far) over the past five years. The dynamics there include low capital construction costs, the ability to bring new power stations on stream on time, and strong domestic demand.Given that China's focus is on self-sufficiency in aluminium, along with China's growing requirement to import alumina or bauxite to meet domestic metal demands, one of BHP Billiton's key messages is that its growth options and project pipeline are aligned to this view, viz., to feed the emerging seaborne bauxite/alumina market. Chinese mining stocks have been on a rip in the past few months; China Zhong Wang is just one of the many beneficiaries of China's USD 585bn stimulus package; measured on a weighted average, listed aluminium stocks around the world have bounced by an average of 96% from recent price lows Chalco has bounced by 88%; other Chinese names that specialise in aluminium have bounced by at least 99%: Shandong Nanshang, Shanxi Guanlu, Henan Shenhuo, Yunnan Aluminium, and Jiaozuo Wanfang.

Selected aluminium & related stocks

Stock

From

From

Value

price

high*

low*

USD bn

Vedanta

GBP 9.25

-66.8%

157.8%

3.751

Arab Aluminium

JOD 1.50

-26.8%

12.8%

0.014

Nordic Aluminium

EUR 11.10

-52.7%

12.8%

0.070

National Aluminium

INR 229.00

-59.6%

117.6%

2.942

Shandong Nanshang

CNY 10.00

-45.0%

113.7%

1.930

Egypt Aluminium

EGP 31.25

-71.1%

33.0%

0.572

Aluar Alumino

ARS 1.96

-63.0%

28.1%

0.435

Vimetco

USD 0.30

-96.8%

130.8%

0.066

Shanxi Guanlu

CNY 6.48

-46.1%

126.6%

0.620

ENRC

GBP 5.41

-65.1%

195.6%

10.156

Henan Shenhuo

CNY 28.68

-44.5%

163.1%

2.098

Yunnan Aluminium

CNY 7.57

-43.3%

99.2%

1.167

BHP Billiton

GBP 13.71

-37.8%

87.4%

122.435

Vale

USD 16.09

-63.6%

82.8%

78.841

Rio Tinto

GBP 23.46

-67.3%

135.8%

49.385

Alcoa

USD 9.26

-79.3%

86.3%

9.008

Chalco

CNY 11.11

-54.4%

88.3%

15.575

Norsk Hydro

USD 4.50

-73.8%

65.4%

5.616

Kaiser Aluminium

USD 29.82

-61.0%

98.7%

0.598

Madras Aluminium

INR 112.00

-50.2%

229.4%

0.251

Jiaozuo Wanfang

CNY 13.97

-58.7%

134.4%

0.982

Global Alumina

CAD 0.41

-78.0%

15.7%

0.065

Alumina Ltd

AUD 1.72

-72.7%

117.7%

1.781

Century Aluminium

USD 3.82

-95.3%

267.3%

0.281

Averages/total

-61.4%

108.3%

308.638

Weighted averages

-58.5%

96.2%

* 12-month

Source: market data; table compiled by Barry Sergeant