"Under the right market conditions, this is an option; it is possible," Xiao Yaqing said. "But we have not decided when. It will depend on the timing of opportunities in the market and our requirements. A key requirement for the company is to preserve its opportunities and possibilities as we become more international."

Chinalco and the U.S. aluminum company Alcoa jointly bought 12 percent of Rio's London-listed shares, or 9 percent of Rio Group's total equity, in January.

The companies have Australian government approval to raise their combined stake to 14.99 percent of the shares in Rio, equating to about 11 percent of the Rio Group. Rio is listed in both London and Australia.

Rio Tinto is defending itself against a $150 billion takeover bid from a bigger mining rival, BHP Billiton, which is waiting on clearance from Australian and European regulators, due later this year, before formally making an offer.

Xiao, who also heads Chalco, which is controlled by Chinalco and is the largest alumina and aluminum producer in China, added that alumina prices would be volatile in the second half of this year and that primary aluminum prices could fluctuate around 18,000 yuan, or $2,600, per ton.

He also said aluminum production might be restricted if power prices kept rising.

China has raised electricity prices and more increases were expected as rising coal costs have pinched power generators and prompted many to curtail coal purchases and power output, contributing to a power shortage over the summer.

Chalco posted a decrease of nearly two-thirds in first-half net profit on Friday because of high production costs, output disruptions and aluminum oversupply.

The company, which faces fierce competition and increasingly scarce raw materials, plans to raise capital over the next two years and diversify overseas.

Xiao said Chalco would welcome cooperation in its Aurukun bauxite project in Queensland, Australia, from foreign companies including Alcoa and Rio Tinto and would not insist on maintaining full control.

Chalco signed a deal in May last year to invest $2.4 billion in the Aurukun project, which would also include an alumina plant with an annual capacity of 2.1 million tons.

Xiao said the company's domestic bauxite projects now under construction would have an annual capacity of about 10 million tons, with about 70 percent of that expected to be in production by the end of 2009.

Originally published by Reuters.

(c) 2008 International Herald Tribune. Provided by ProQuest LLC. All rights Reserved.