UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

_______________

FORM 20-F

[ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF

THE SECURITIES EXCHANGE ACT OF 1934

OR

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2008

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-15264

(Exact name of Registrant as specified in its charter)

ALUMINUM CORPORATION OF CHINA LIMITED

(Translation of Registrant's name into English)

People's Republic of China

(Jurisdiction of incorporation or organization)

_______________

No. 62 North Xizhimen Street, Haidian District, Beijing, People's Republic of China (100082)

(Address of Principal Executive Offices)

_______________

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of each Class

American Depositary Shares, each representing 25 H Shares

Class H Ordinary Shares*

Name of Each Exchange on which Registered

New York Stock Exchange, Inc.

* Not for trading, but only in connection with the registration of American Depositary Shares on the New York Stock Exchange, Inc. The Ordinary H Shares are also listed and traded on The Stock Exchange of Hong Kong Limited.

Securities registered or to be registered pursuant to Section 12(g) of the Act:

None

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None

(Title of Class)

Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of December 31, 2008:

Domestic Shares, par value RMB1.00 per share

9,580,521,924

H Shares, par value RMB1.00 per share

3,943,965,968

(including 406,067,500 H Shares in the form of American Depository Shares)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes [X] No [ ]

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Security Exchange Act of 1934.

Yes [ ] No [X]

Note-Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer [X] Accelerated filer [ ] Non-accelerated filer [ ]

Indicate by check mark which financial statement item the registrant has elected to follow.

Item 17 [X] Item 18 [ ]

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)

Yes [ ] No [X]

Pages

Forward-Looking Statements

i

Certain Terms and Conventions

ii

PART I

Item 1.

Identity of Directors, Senior Management and Advisors

1

Item 2.

Offer Statistics and Expected Timetable

2

Item 3.

Key Information

2

Item 4.

Information on the Company

14

Item 5.

Operating and Financial Review and Prospects

46

Item 6.

Directors, Senior Management and Employees

68

Item 7.

Major Shareholders and Related Party Transactions

79

Item 8.

Financial Information

86

Item 9.

The Offer and Listing

88

Item 10.

Additional Information

89

Item 11.

Quantitative and Qualitative Disclosures about Market Risk

99

Item 12.

Description of Securities Other than Equity Securities

102

PART II

Item 13.

Defaults, Dividend Arrearages and Delinquencies

102

Item 14

Material Modifications to the Rights of Security Holders and Use of Proceeds

102

Item 15

Controls and Procedures

102

Item 16

[Reserved]

102

Item 16A

Audit Committee Financial Expert

102

Item 16B

Code of Ethics

102

Item 16C

Principal Accountant Fees and Services

103

Item 16D

Exemption from the Listing Standards for Audit Committees

103

Item 16E

Purchase of Equity Securities by the Issuer and Affiliated Purchasers

104

PART III

Item 17.

Financial Statements

104

Item 18.

Financial Statements

104

Item 19.

Exhibits

104

Certain information contained in this annual report, which does not relate to historical financial information may be deemed to constitute forward-looking statements. The words or phrases "will likely result", "are expected to", "will continue", "is anticipated", "estimate", "project", "believe" or similar expressions are intended to identify "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended, or the Exchange Act. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results and those presently anticipated or projected. We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. These forward-looking statements include, without limitation, statements relating to:

*

future general economic conditions;

*

future conditions in the international and China capital markets;

*

future conditions in the financial and credit markets;

*

future prices and demand for our products;

*

future PRC tariff levels for alumina and primary aluminum;

*

sales of our products;

*

the amount and nature of, and potential for, future development;

*

production, consumption and demand forecasts of bauxite, alumina, primary aluminum and aluminum fabrication products;

*

expansion, consolidation or other trends in the primary aluminum industry;

*

the effectiveness of our cost-saving measures;

*

future expansion plans and capital expenditures;

*

expected production capacity increases;

*

competition;

*

changes in legislation, regulations and policies;

*

estimates of proven and probable bauxite reserves;

*

our research and development plans; and

*

our dividend policy.

These statements are based on assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate in particular circumstances. However, whether actual results and developments will meet our expectations and predictions depends on a number of risks and uncertainties, which could cause actual results to differ materially from our expectations. These risks are more fully described in the section entitled "Item 3. Key Information - Risk Factors".

- i -

Consequently, all of the forward-looking statements made in this annual report are qualified by these cautionary statements. We cannot assure you that the actual results or developments anticipated by us will be realized or, even if substantially realized, that they will have the expected effect on us or our business or operations.

Unless otherwise indicated, statistical and market trend information, as well as statements related to market position and competitive data, are based on our internal statistics and/or estimates gathered from our own research and/or various publicly available sources.

Translations of amounts in this annual report from Renminbi into U.S. dollars and vice versa have been made at the rate of RMB6.8225 to US$1.00, which was the noon buying rate in the New York City for cable transfers in Renminbi per U.S. dollar as certified for customs purposes by the Federal Reserve Bank of New York on December 31, 2008. You should not construe these translations as representations that the Renminbi amounts actually represent U.S. dollar amounts or could be converted into U.S. dollars at that rate or at all. See "Item 3. Key Information - Exchange Rate Information" for information regarding the noon buying rates from January 1, 2004 through April 17, 2009.

We publish our financial statements in Renminbi.

Various amounts and percentages set out in this document have been rounded and, accordingly, are not the exact figures and may not total.

Unless the context otherwise requires, references in this annual report to:

"A Shares" are to the domestic ordinary shares, with a nominal value of RMB1.00 each;

"alumina-to-silica ratio" are to the ratio of alumina to silica by weight found in bauxite;

"aluminum fabrication" are to the process of taking primary aluminum or recycled aluminum materials and converting it into plates, strips, bars, tubes, etc. which can be further converted into consumer or other end products;

"Baotou Aluminum" are to Baotou Aluminum Co., Ltd. On December 28, 2007, it became our wholly-owned subsidiary after the completion of share exchange;

"Baotou Group" are to Baotou Aluminum (Group) Co., Ltd.;

"bauxite" are to mineral ores whose composition is principally alumina;

"Bayer process" are to a refining process employed to extract alumina from ground bauxite with a strong solution of caustic soda at an elevated temperature;

"Chalco", "the Company", "the Group", "our company", "we", "our" and "us" are to Aluminum Corporation of China Limited and its subsidiaries and, where appropriate, to its predecessors;

"Chalco Hong Kong" are to Chalco Hong Kong Limited, a subsidiary of Chalco established under Hong Kong Law;

"Chalco Kailin" are to Shanghai Chalco Kailin Aluminum Co., Ltd.;

"Chalco Mining" are to Chalco Mining Co., Ltd, our subsidiary established under PRC law;

"Chalco Nanhai" are to Chalco Nanhai Alloy Company, our subsidiary established under PRC law;

"Chalco Qingdao" are to Chalco Qingdao Light Metal Company Limited, our subsidiary established under PRC Law;

"Chalco Ruimin" are to Chalco Ruimin Company Limited and in late May, 2008, we acquired 75% of its equity interest;

"Chalco Southwest Aluminum" are to Chalco Southwest Aluminum Company Limited and in late May, 2008 we acquired 60% of its equity interest from Chinalco on the China Beijing Equity Exchange;

"Chalco Southwest Aluminum Cold Rolling" are to Chalco Southwest Aluminum Cold Rolling Company Limited and in May, 2008, we acquired 100% of its equity interest from Chinalco on the China Beijing Equity Exchange;

"Chalco Zunyi" are to Chalco Zunyi Alumina Co., Ltd., a subsidiary of Chalco established under PRC Law;

"China" and the "PRC" are to the People's Republic of China, excluding for purposes of this annual report, Hong Kong Special Administrative Region, Macao Special Administrative Region and Taiwan;

"China Cinda" are to China Cinda Asset Management Corporation, a PRC state-owned financial enterprise established pursuant to PRC government approval;

"China Development Bank" are to a PRC state-owned bank established pursuant to PRC government approval;

"China Nonferrous Metals Technology" are to China Nonferrous Metals Processing Technology Co., Ltd.;

- ii -

"Chinalco", "Chinalco Group" and the "ultimate holding company" are to our controlling shareholder, Aluminum Corporation of China and its subsidiaries (other than Chalco and its subsidiaries) and, where appropriate, to its predecessors;

"CSRC" are to China Securities Regulatory Commission.

"diasporite" are to a mineral of bauxite deposits with the chemical composition of Al₍₂₎O₍₃₎ * H₍₂₎O;

"Exchange Act" are to The Securities Exchange Act of 1934, as amended;

"fabricating ingots" are to the primary aluminum or aluminum alloy ingots that may be used directly in the aluminum fabrication process;

"Fushun Aluminum" are to Fushun Aluminum Company Limited, our subsidiary established under PRC law;

"Gansu Hualu" are to Gansu Hualu Aluminum Company Limited, our subsidiary established under PRC law;

"gibbsitic" are to a mineral of bauxite deposits with the chemical composition of Al₍₂₎O₍₃₎ * H₍₂₎O;

"Guan Lv" are to Shanxi Guan Lv Company Limited;

"Guangxi Huayin" are to Guangxi Huayin Aluminum Company Limited, a PRC entity in which we hold 33% of the equity interest;

"Guangxi Investment" are to Guangxi Investment (Group) Co., Ltd., formerly known as Guangxi Development and Investment Co., Ltd., a PRC state-owned enterprise established in the PRC and one of our promoters and shareholders;

"Guizhou Development" are to Guizhou Provincial Materials Development and Investment Corporation, a PRC state-owned enterprise established in the PRC and one of our promoters and shareholders;

"H Shares" are to overseas listed foreign shares of par value RMB1.00 each, which are listed on the Hong Kong Stock Exchange and traded in HK dollars;

"Henan Aluminum" are to Chinalco Henan Aluminum Company Limited and in late May, 2008 we acquired 84.02% of its equity interest from Chinalco on the China Beijing Equity Exchange;

"HK$" and "HK dollars" are to Hong Kong dollars, the lawful currency of the Hong Kong Special Administrative Region of the PRC;

"Hong Kong Stock Exchange" are to The Stock Exchange of Hong Kong Limited;

"Huasheng Jiangquan" are to Huasheng Jiangquan Group Co., Ltd.;

"Huaxi Aluminum" are to Huaxi Aluminum Company Limited and in late May, 2008, we acquired 56.86% of its equity interest from Chinalco on the China Beijing Equity Exchange;

"Huayu Aluminum" are to Shandong Huayu Aluminum and Power Company Limited, our subsidiary established under PRC law;

"hybrid Bayer-sintering process" are to the refining process developed in China which involves the application of the Bayer process and the sintering process in combination to extract alumina from bauxite more efficiently;

"ingots" and "remelt ingots" are to the international standard primary metal products from an aluminum smelter. Remelt ingots are the aluminum ingots generally remelted before being cast into alloyed products or used for aluminum fabrication;

"Jiaozuo Wanfang" are to Jiaozuo Wanfang Aluminum Manufacturing Co. Ltd., previously our associated company established under PRC law, in which we hold 29% of its equity interest. We have determined that we have established de facto control over Jiaozuo Wanfang and therefore, Jiaozuo Wanfang has been our subsidiary since January 1, 2008 and its results have been included in our consolidated financial statements since then;

"kA" are to kiloamperes, a unit for measuring the strength of an electric current, with one kiloampere equal to 1,000 amperes;

"kWh" are to kilowatt hours, a unit of electrical power, meaning one kilowatt of power for one hour;

"Lanzhou Aluminum" are to Lanzhou Aluminum Co., Ltd., previously our associated company that was a joint stock limited company established under the PRC law, whose A Shares were traded on the Shanghai Stock Exchange. On April 24, 2007, we completed the merger of Lanzhou Aluminum by way of share exchange and Lanzhou Aluminum became our wholly-owned subsidiary. Its shares ceased to be traded on the Shanghai Stock Exchange. In June 2007, Lanzhou Aluminum was divided into two wholly-owned branches: Lanzhou branch and Northwest Aluminum Fabrication Plant, which are mainly engaged in producing primary aluminum products and aluminum fabrication products, respectively;

"Liancheng branch" are to Lanzhou Liancheng Longxing Aluminum Company Limited and we acquired 100% of its equity interest from Chinalco on the China Beijing Equity Exchange in late May, 2008 and changed it into Liancheng branch, our wholly-owned branch;

- iii -

"Listing Rules" and "Hong Kong Listing Rules" are to the Rules Governing the Listing of Securities on the Hong Kong Stock Exchange (as amended from time to time);

"LME" are to the London Metal Exchange Limited;

"Longmen Aluminum" are to Shanxi Longmen Aluminum Co., Ltd., our subsidiary established under PRC law;

"Nanping Aluminum" are to Fujian Nanping Aluminum Company Limited;

"NDRC" are to China National Development and Reform Commission;

"Northwest Aluminum" are to Northwest Aluminum Fabrication Plant, our wholly-owned branch;

"NYSE" are to New York Stock Exchange Inc.;

"ore-dressing Bayer process" are to a refining process we developed which involves the treatment of bauxite in order to increase its alumina-to-silica ratio so as to allow the Bayer process to then be applied;

"Pingguo Aluminum" are to Pingguo Aluminum Company;

"provinces" are to provinces and to provincial-level autonomous regions and municipalities in China, excluding Hong Kong Special Administrative Region, Macao Special Administrative Region, and Taiwan, which are directly under the supervision of the central PRC government;

"refining" are to the chemical process required to produce alumina from bauxite;

"Research Institute" are to Zhengzhou Research Institute, our wholly-owned branch mainly providing research and development services;

"RMB" are to Renminbi, the lawful currency of the PRC;

"SASAC" are to State-owned Assets Supervision and Administration Commission of the State Council;

"Shandong Aluminum" are to Shandong Aluminum Industry Co., Limited, previously our majority owned subsidiary established under PRC law, whose A Shares were traded on the Shanghai Stock Exchange. On April 24, 2007, we completed the merger of Shandong Aluminum by way of share exchange and Shandong Aluminum became our wholly-owned subsidiary. Its shares ceased to be traded on the Shanghai Stock Exchange. In September 2007, Shandong Aluminum was changed into Shandong branch, our wholly-owned branch;

"Shanxi Huasheng" are to Shanxi Huasheng Aluminum Company Limited, our subsidiary established under PRC law;

"Shanxi Huaze" are to Shanxi Huaze Aluminum and Power Co., Limited, our subsidiary established under PRC law;

"sintering process" are to a refining process employed to extract alumina from ground bauxite by mixing with supplemental materials and burning in a coal-fired kiln;

"smelting" are to the electrolytic process required to produce molten aluminum from alumina;

"tonne" are to the metric ton, a unit of weight, with one metric ton equal to 1,000 kilograms or 2,204.6 pounds;

"US$" are to U.S. dollars, the lawful currency of the United States of America;

"WTO" are to World Trade Organization;

"Xinan Aluminum" are to Xinan Aluminum (Group) Company Limited;

"Yichuan Power" are to Yichuan Power Industries Group Company;

"Zhangze Electric Power" are to Shanxi Zhangze Electric Power Co., Ltd.; and

"Zunyi Aluminum" are to Zunyi Aluminum Company Limited, our subsidiary established under PRC law.

PART I

ITEM 1.

IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

Not required for filing this annual report.

- 1 -

ITEM 2.

OFFER STATISTICS AND EXPECTED TIMETABLE

Not required for filing this annual report.

ITEM 3.

KEY INFORMATION

The following tables present our summary income statement data and cash flow data for the years ended December 31, 2004, 2005, 2006, 2007 and 2008; and the summary balance sheet data as of December 31, 2004, 2005, 2006, 2007 and 2008. The summary balance sheet data as of December 31, 2006, 2007 and 2008 and income statement and cash flow data for the years ended December 31, 2006, 2007 and 2008 have been derived from, and should be read in conjunction with, the audited consolidated financial statements included elsewhere in this report. The summary balance sheet data as of December 31, 2004 and 2005 and income statement and cash flow data for the years ended December 31, 2004 and 2005 have been derived from our historical financial statements as of and for such dates, which are not included in this annual report. Unless otherwise indicated, the financial statements are prepared and presented in accordance with Hong Kong Financial Reporting Standards ("HKFRS").

In accordance with HKFRS, as Chinalco exercised de facto and actual control over the Company, Baotou Aluminum and "seven common control entities acquired in 2008" (defined in Note 5 to consolidated financial statements in Item 17) both before and after our acquisitions, these acquisitions qualify as common control business combinations, and merger accounting is applied. Accordingly, the consolidated financial statements for all periods presented have been retroactively restated as if the current structure and operations had been in existence since inception. For information on common control business combinations in accordance with HKFRS, see Note 5 to our consolidated financial statements. In contrast, the Company is not considered to be controlled by Chinalco for the application of generally accepted accounting principles in the United States ("U.S. GAAP"). Hence, the acquisitions above are not common control transactions and are accounted for under the purchase method by including the results of these acquirees only from the respective effective dates of the acquisitions. For a reconciliation of our net income and equity under HKFRS to U.S. GAAP, see Note 35 to our audited consolidated financial statements. For more information, please see "Item 5 - Operating and Financial Review and Prospects - U.S. GAAP Reconciliation".

Years Ended December 31

2004

2005

2006

2007

2008

2008

RMB

RMB

RMB

RMB

RMB

US$⁽²⁾

(in thousands, except per share and per ADS data)

- 2 -

INCOME STATEMENT DATA:

HKFRS(1)

Revenue

74,287,003

85,198,835

76,725,941

11,246,016

Cost of sales

(52,358,293)

(64,936,133)

(70,073,660)

(10,270,965)

Gross profit

21,928,710

20,262,702

6,652,281

975,051

Selling and distribution expenses

(1,185,088)

(1,355,534)

(1,562,409)

(229,008)

General and administrative expenses

(2,825,858)

(3,042,363)

(3,462,472)

(507,508)

Research and development expenses

(126,294)

(229,803)

(177,507)

(26,018)

Other gains, net

373,061

158,913

372,771

54,638

Operating profit

18,164,531

15,793,915

1,822,664

267,155

Finance costs, net

(795,918)

(1,040,171)

(1,709,566)

(250,578)

Operating profit after finance costs

17,368,613

14,753,744

113,098

16,577

- 3 -

Share of (losses)/profits of

    jointly controlled entities

(11,419)

(3,381)

1,672

245

Share of profits of associates

105,177

241,945

10,045

1,472

Profit before income tax expense/benefits

17,462,371

14,992,308

124,815

18,294

Income tax (expense)/benefits

(4,465,282)

(2,869,210)

33,557

4,919

Profit for the year

12,997,089

12,123,098

158,372

23,213

Attributable to:

Equity holders of the Company

12,093,143

10,753,042

9,228

1,353

Minority interest

903,946

1,370,056

149,144

21,860

Dividends

2,190,177

4,131,749

703,273

103,081

    Interim dividends per share

0.188

0.137

0.052

0.008

    Interim dividends per ADS

4.700

3.425

1.300

0.191

    Special dividends per share

-

0.013

-

-

    Special dividends per ADS

-

0.325

-

-

    Final dividends per share

-

0.115

-

-

    Final dividends per ADS

-

2.875

-

-

    Proposed final dividends per share

-

0.053

-

-

    Proposed final dividends per ADS

-

1.325

-

-

Basic and diluted net earnings per share

1.03

0.84

0.00068

0.0001

- 4 -

Basic and diluted earnings per ADS

25.81

21.02

0.01706

0.0025

U.S. GAAP

Operating income/(loss)

9,214,004

10,271,179

17,270,379

14,203,729

(5,520,122)

(809,105)

Net income/(loss)

6,622,916

7,229,167

11,726,471

9,899,628

(6,646,986)

(974,274)

Basic and diluted earnings/(loss) per share

0.60

0.65

1.03

0.79

(0.49)

(0.07)

Basic and diluted earnings/(loss) per ADS

15.00

16.36

25.63

19.78

(12.29)

(1.80)

Segment operating profit/(loss):

HKFRS

Alumina

13,858,508

7,891,229

1,582,084

231,892

Primary aluminum

5,351,873

7,810,353

484,073

70,952

Aluminum fabrication

204,846

132,280

(314,083)

(46,036)

Others

(59,443)

(20,594)

36,294

5,320

Elimination

(331,574)

429,817

266,174

39,014

Total operating income

19,024,210

16,243,085

2,054,542

301,142

- 5 -

As of December 31,

2004

2005

2006

2007

2008

2008

RMB

RMB

RMB

RMB

RMB

US$⁽²⁾

(in thousands)

BALANCE SHEET DATA

HKFRS⁽¹⁾

Bank balances and cash

13,897,343

9,054,565

16,295,585

2,388,506

Total current assets

30,498,598

30,274,879

42,486,987

6,227,480

Total non-current assets

61,156,252

75,573,189

93,040,532

13,637,307

Total assets

91,654,850

105,848,068

135,527,519

19,864,787

- 6 -

Total short-term loans

    (including current portion of long-term loans)

9,267,102

8,295,077

17,137,932

2,511,972

Short-term bonds

4,985,111

3,051,471

5,152,283

755,190

Total long-term loans

    (excluding current portion of long-term loans)

11,230,339

15,479,914

24,169,469

3,542,612

Medium-term notes and long-term bonds

-

1,979,683

11,963,083

1,753,475

Net assets (excluding minority share)

46,931,525

60,688,063

54,998,482

8,061,338

U.S. GAAP

Total assets

47,260,826

55,525,980

76,004,936

104,778,483

137,665,751

20,178,196

Total long-term loans

    (excluding current portion of long-term loans)

7,391,663

9,690,493

8,480,736

12,139,260

23,107,469

3,386,950

Medium-term notes and long-term bonds

-

-

-

1,979,683

11,963,083

1,753,475

Net assets (excluding minority share)

25,436,606

30,720,995

42,283,082

68,447,456

60,325,077

8,842,078

Number of shares ('000)

11,040,835

11,049,876

11,649,876

13,524,488

13,524,488

13,524,488

- 7 -

Years Ended December 31,

2004

2005

2006

2007

2008

2008

RMB

RMB

RMB

RMB

RMB

US$⁽²⁾

(in thousands)

OTHER FINANCIAL DATA

HKFRS⁽¹⁾

Net cash generated from operating activities

13,961,571

10,652,606

2,454,434

359,759

Net cash used in investing activities

(12,291,787)

(8,563,449)

(22,204,494)

(3,254,597)

Net cash generated from/(used in)

    financing activities

840,976

(3,954,099)

26,937,003

3,948,260

Capital expenditure

Alumina

3,462,875

4,634,932

8,582,811

1,258,016

Primary aluminum

8,649,685

12,651,715

10,668,948

1,563,789

Aluminum fabrication

1,198,764

1,203,204

1,805,806

264,684

Others

120,286

493,746

138,921

20,362

Unallocated

682,054

497,954

1,217,362

178,433

Total capital expenditure

14,113,664

19,481,551

22,413,848

3,285,284

(1)

The amounts as of December 31, 2006, 2007 and 2008 and for each of the three years ended December 31, 2008 are presented to reflect all of the common control business combinations described above under merger accounting method under HKFRS. The HKFRS financial information as of December 31, 2004 and 2005 and for each of the two years ended December 31, 2005 is omitted because such selected financial data cannot be provided on a restated basis without unreasonable effort.

(2)

Translated solely for the convenience of the reader into U.S. dollars at the noon buying rate in New York for cable transfers payable in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York of US$1.00 to RMB6.8225 prevailing on December 31, 2008.

- 8 -

The following table sets forth, for the periods indicated, the noon buying rate in New York for cable transfers payable in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York in Renminbi per U.S. dollar:

Noon Buying Rate

Period

Period End

Average⁽¹⁾

High

Low

(expressed in RMB per US$)

2004

8.2765

8.2768

8.2773

8.2764

2005

8.0702

8.1826

8.2765

8.0702

2006

7.8041

7.9579

8.0702

7.8041

2007

7.2946

7.5806

7.8127

7.2946

2008

    October

6.8388

6.8358

6.8521

6.8171

    November

6.8254

6.8281

6.8373

6.8220

    December

6.8225

6.8539

6.8842

6.8225

2009

    January

6.8392

6.8360

6.8403

6.8225

    February

6.8395

6.8363

6.8470

6.8241

    March

6.8329

6.8360

6.8438

6.8240

    April (through April 17)

6.8325

6.8336

6.8361

6.8316

(1)

Determined by averaging the rates on the last business day of each month during the respective period, except for monthly averages, which are determined by averaging the rates on each business day of the month.

On April 17, 2009, the exchange rate for Renminbi was U.S. dollar 1.00 = RMB6.8325

- 9 -

Not Applicable.

Not Applicable.

We are subject to various changing business, competitive, economic, political and social conditions in China as well as factors relating to the alumina, aluminum and aluminum fabrication industry. These changing conditions and factors entail certain risks, which are described below:

*

As widely reported, financial and credit markets in the United States, Europe and Asia have been experiencing extreme disruption, volatility and deterioration in recent months including, among other things:

*

Severely diminished liquidity and credit availability for all classes of borrowers across all markets;

*

Increasing doubts regarding solvency of banks, insurance companies, hedge funds and other credit and capital providers;

*

Increasing doubts regarding the solvency of a broad range of corporations;

*

Sharp reduction in the valuations of a broad range of widely-held assets and investments, as well as instruments that derive their value from such assets;

*

Rating downgrades of corporate debt and related instruments across a broad range of issuers, including both financial institutions and corporate issuers;

*

Extreme volatility and continual erosion of value of public securities markets;

*

Extreme volatility in currency exchange rates, and sharp erosion in commodity prices; and

*

Sharp increase in public debt in the United States and other countries as a variety of programs are announced and implemented by governments seeking to address the foregoing factors.

As a result, demand for our products has decreased, which has affected our results of operations.

*

There is no assurance that there will not be further deterioration in financial and credit markets, and investor and consumer confidence in the world's major economies. Such economic conditions have had a material adverse effect on the demand for our products and the results of our operations. Since 2008, especially in the fourth quarter of 2008 when the international financial crisis posed a deepening impact on enterprises' results, major aluminum consuming sectors such as the real estate and automobile sectors have seen negative growth, followed by decreased global aluminum consumption and increase in inventories. In light of the sharp decline in aluminum prices and decreased consumption, both domestic and international aluminum producers reduced production. As of the end of December 2008, approximately 13.5% of the global aluminum production capacity was idled, while in China, approximately 24.1% of the aluminum production capacity was idled. As of the end of February 2009, only 76.5% of the global primary aluminum production capacity was being used. Since October 2008, we have idled 24% of our primary aluminum production capacity. Affected by the decrease in the production of primary aluminum, the demand for alumina decreased accordingly, and the global alumina manufacturers started to reduce their production in the fourth quarter of 2008. As of December 31, 2008, approximately 9.8% of the global alumina production capacity was idled, while in China, approximately 24.4% of the alumina production capacity was idled. As of the end of February 2009, only 81.5% of the global alumina production capacity was used. Since October 2008, we have idled 39% of our alumina production capacity. Some economists are predicting that the global economy could continue to experience a prolonged recession or even a depression. The current economic conditions and uncertainty about future economic conditions make it challenging for us to forecast our results of operations, make business decisions and identify the risks that may affect our business. If we are not able to timely and appropriately adapt to changes resulting from the difficult macroeconomic environment, our business, results of operations and financial condition may be materially and adversely affected.

*

We price our alumina and primary aluminum products by reference to international and domestic market prices, import cost of alumina and changes in supply and demand in the domestic market. Each of these factors may fluctuate beyond our control. Historically, the international market prices for alumina and primary aluminum products have been volatile. Since October, 2008, influenced by the global recession, the demand for our products has decreased, and as the result, the prices for our products have declined. Because most of our costs are fixed and we may not be able to respond quickly to any sudden decrease in alumina or primary aluminum prices, any significant fluctuation in international market prices could materially and adversely affect our business, financial condition and results of operations.

*

Our plans to upgrade and expand our production capacity will require capital expenditures of approximately RMB13.4 billion in 2009. See "Item 4. Information on the Company - Property, Plants and Equipment - Our Expansion". We may also need further funding for debt servicing, working capital, investments, potential acquisitions and joint ventures and other corporate requirements. We cannot assure you that cash generated from our operations will be sufficient to fund these development plans, or that our actual capital expenditures and investments will not significantly exceed our current planned amounts. If either of these conditions arises, we may have to seek external financing to satisfy our capital needs. Our ability to obtain external financing at reasonable costs is subject to a variety of uncertainties. Failure to obtain sufficient external funds for our development plans could adversely affect our business, financial condition and results of operations.

*

Our planned expansion, cost reduction and technology improvement projects could be delayed or adversely affected by, among other things, failure to receive required regulatory approvals including relevant PRC government approvals and foreign government approvals, difficulties in obtaining sufficient financing, technical difficulties, or human and other resources constraints. Moreover, the actual costs involved in these projects may exceed those originally contemplated. Cost savings and other economic benefits expected from these projects may not materialize as a result of any project delay, cost overrun, or change in market conditions. Failure to obtain intended economic benefits from these projects could adversely affect our business, financial condition and results of operations.

*

Our business has grown rapidly. In order to manage our growth and increased scale of operations effectively, we must continue to implement and improve our operational, financial and management systems, continue to develop the managerial skills of our managers, and continue to train, motivate and manage our employees. Failure to manage our growth and expand operations effectively could adversely affect our financial condition and results of operations.

*

We signed the Aurukun project development agreement with the Queensland State Government of Australia ("Queensland Government") on March 23, 2007. We also entered into a land use agreement with various indigenous peoples in respect of the Aurukun project on March 23, 2007. The Queensland Government officially issued the Aurukun bauxite exploration permit to the Company in September 2007. We are currently preparing the feasibility report. Further, to implement our international development strategy, we through our subsidiary Chalco Hong Kong, entered into a joint venture arrangement with Malaysia Mining Company (MMC) and Saudi Arabian Binladin Group (SBG) on May 9, 2008, according to which, a joint venture will be established in Saudi Arabia and will develop and operate a primary aluminum plant with a planned annual capacity of approximately one million tonnes and a self-owned power plant with a planned capacity of 1,860MW. We expect to invest US$4.5 billion in the project and be the largest shareholder, holding 40% of the total equity interest. We are currently preparing the feasibility report. As we are new to these overseas markets, we cannot assure you that our overseas expansion or investment will be successful or that we will not suffer foreign exchange losses in connection with our overseas investment.

- 10 -

*

Our operations consume substantial amounts of energy. Although we generally expect to meet the energy requirements for our alumina refineries and primary aluminum smelters from internal sources and external contracts, our results of operations may be materially adversely affected by the following factors:

*

significant increases in electricity costs; and

*

unavailability or shortages of electrical power or other energy sources, interruption of energy supply, or curtailment of the operation of one or more refineries or smelters due to our inability to extend energy contracts upon their expirations.

*

Electricity cost is the principal production cost component of our primary aluminum production. During 2008, our average per kilowatt-hour, or kWh, electricity price increased by 9.7% from the prior year. Moreover, with the rapid development of the PRC economy, demand for energy including electricity has generally continued to increase. If energy costs increase but are not passed on to our customers, our operating margin, financial condition and results of operations could be materially adversely affected.

*

The smelting of primary aluminum employs an electrolytic reduction process that requires a large and continuous supply of electricity. Interruptions of electricity supply can result in lengthy production shutdowns, increased costs associated with restarting production and waste of production in progress. There have been shortages and disruptions in electricity supply in various regions across China, especially in peak seasons, such as summer or when there are severe weather conditions. Our operations in Guizhou Province were disrupted due to power blackouts resulting from severe winter weather conditions in early 2008. In extreme cases, interruptions of electricity supply can also cause damage to or destruction of the equipment and facilities. If this occurs, our operations may be adversely affected.

*

We rely heavily on coal as our energy and fuel source in our production process of alumina. As we significantly increase our production capacities, our consumption of coal will increase significantly accordingly. If our coal suppliers are not able to supply the amount of coal needed for our production due to general short supply of coal or lack of available railcars for transportation or any other reason, we may be forced to reduce our production output or suspend our production, which could materially adversely affect our financial condition and results of operations. In addition, due to the rapid development of the PRC economy, demand for coal has generally continued to increase. During 2008, our average per ton price of coal increased by 65%. If cost of coal increases but is not passed on to our customers, our operating margin, financial condition and results of operations could be materially adversely affected.

*

We face competition from both domestic and international primary aluminum producers. Our principal competitors in the primary aluminum business are domestic smelters, some of which are expanding their production capacities. These smelters pose competitive challenges to our primary aluminum operations in production costs, product quality and price. We also face increasing competition from international primary aluminum suppliers as China continues to open its aluminum industry to international trade. As a result of China's accession to the WTO on December 11, 2001, competition from international suppliers of alumina and primary aluminum may increase as tariff and non-tariff barriers for imported alumina and primary aluminum have been significantly reduced and may continue to be reduced. The standard tariff on imports of primary aluminum and alumina into China was reduced to nil on August 1, 2007 and January 1, 2008 respecitvely. Intensified competition may result in reductions in our selling prices or sales volume and may have a material adverse effect on our financial condition and results of operations. If we are not successful in reducing our costs, or if we are unable to maintain or increase our current share of China's primary aluminum market, our financial condition, results of operations and profitability could be materially and adversely affected.

*

Bauxite is the most important raw material for alumina production. We obtain our bauxite from three major sources, including our own mines, jointly operated mines, and other suppliers. See "Item 4. Information on the Company - Business Overview - Business Operations - Alumina - Raw Materials - Bauxite". Each of these sourcing methods could affect the security or cost of our supply of bauxite. The price for bauxite has been volatile. Before the fourth quarter of 2008, the price of bauxite increased substantially due to the rapid expansion of alumina output in China which significantly increased the demand for bauxite. In 2008, our average cost of imported bauxite increased by 35.6% from RMB382 per tonne in 2007 to RMB518 per tonne. However, since the fourth quarter of 2008, the price of bauxite started to decline and in early 2009 it started to increase again. If we cannot obtain a steady supply of key raw materials at a competitive price, our financial condition and results of operations could be materially adversely affected.

- 11 -

*

Our alumina products are mainly delivered by rail or truck, and our primary aluminum products are transported to our customers mostly by rail. In 2008, our deliveries were affected by the snow storm early in the year and severe earthquakes in Sichuan Province in May. If we are unable to make on-time delivery due to logistics and transportation problems, our results of operations may be adversely affected.

*

A main objective of our research and development projects is to develop new methods and new processes to improve the efficiency of extracting alumina from bauxite that has relatively low alumina-to-silica ratios. If China's supply of bauxite with high alumina-to-silica ratios declines, our failure to achieve technological improvements or to implement such improvements in commercial applications could impede our efforts to reduce unit production costs and to compete with major international producers.

*

The bauxite reserve data on which we base our production, revenue and expenditure plans are estimates that we have developed internally and may be inaccurate. There are numerous uncertainties inherent in estimating quantities of reserves, including many factors beyond our control. If these estimates are inaccurate or the indicated tonnages are not recovered, our business, financial condition, and results of operations may be materially and adversely affected.

*

We rely on short-term borrowings to meet part of our financing needs. The financial and credit markets in the United States, Europe and Asia have been experiencing extreme disruption, volatility and deterioration in recent months, including severely diminished liquidity and credit availability for all classes of borrowers across all markets. As such, we may experience difficulty in obtaining financing in a timely manner. If we fail to achieve timely rollover, extension or refinancing of our short-term debts, we may be unable to meet our obligations in connection with debt servicing, accounts payable and/or other liabilities when they become due and payable. In addition, we may be exposed to changes in interest rates. If interest rates increase substantially, our results of operations could be adversely affected.

*

Our primary sources of funding are cash generated by operating activities, short-term and long-term bank borrowings, proceeds from share offerings, and proceeds from short-term bond, medium-term note and long-term bond offerings. In 2008, we required our customers to make prepayments or deposits for purchases of alumina. The total amount of prepayments and deposits was approximately RMB3,957 million as of December 31, 2008. We have relied on prepayments and deposits received from customers as a source of liquidity. In the event that demand for our alumina declines significantly, we may not be able to require such prepayments and deposits from customers, in which case this source of liquidity may not be available to us.

*

Servicing our medium-term notes and long-term bonds may require a significant portion of our cash flow and therefore, may adversely affect our ability to expand or to continue our operations. In 2008, we issued medium-term notes totaling RMB10 billion maturing in 2011 and 2013, respectively. In addition, in 2007, we issued RMB2 billion of long-term bonds maturing in 2017. Our ability to make scheduled payments under the medium-term notes and long-term bonds depends on, among other things, our future operating results, and will require a portion of our cash flow to service our obligations under the medium-term notes and long-term bonds, which could impair our ability to expand our business. Our failure to generate sufficient cash flow from our operations in the future to service our obligations under the medium-term notes and long-term bonds could affect our ability to continue our operations.

*

Any new products we may manufacture in the future may expose us to new risks associated with such new products. In 2008 we acquired five aluminum fabrication plants from Chinalco and China Nonferrous Metals Technology on the China Beijing Equity Exchange, which increased our annual aluminum fabrication production capacity from 100,000 tonnes to 982,000 tonnes as of December 31, 2008. Aluminum fabrication products' profit margin is generally lower than that of alumina and primary aluminum. Though expansion of our aluminum fabrication production capacity may enhance our ability to manage risks in the aluminum markets through vertical integration and our ability to compete with integrated international producers, it may also decrease our average profit margin and therefore, may adversely affect our results of operation.

*

We may not be able to adequately manage our expansion. We have significantly grown our business and expanded our production capacity both organically and through acquisition of subsidiaries and establishing joint ventures. In 2008, we acquired six subsidiaries and the aluminum alloy business of Pingguo Aluminum at a total initial consideration of RMB4.28 billion. We may explore further acquisition and joint venture opportunities in the future to rapidly grow our business and better compete in the market. However, any such acquisition or joint venture transaction may lead to various risks, including the change of laws and policies or their interpretation that affect the operations of the acquired businesses, the inability to generate sufficient revenue to offset the costs and expenses of acquisitions, general business risk, management risk, technology risk, market acceptance risk and potential loss of, or harm to, relationships with employees, customers and business partners as a result of integrating new businesses. Any such transactions may require the utilization of debt, equity or other capital resources, and such use may represent a diversion of financial resources from our other businesses. Additionally, the integration of the acquired businesses diverts a great deal of management attention and dedicated staff efforts from other areas of our business. Because of the aforementioned risks and diversions of financial and human resources, these transactions may not create value for us or our shareholders.

*

The internal control over financial reporting of our newly acquired subsidiaries may have material weakness or deficiencies, which may require our management to devote significant attention and resources to remedy any such weakness or deficiencies. Failure to timely achieve and maintain the adequacy of our internal controls of our newly acquired subsidiaries could affect our consolidated financial reporting, resulting in a loss of investor confidence in the reliability of our reporting processes, which could negatively impact the market price of our ADSs.

*

We are exposed to risks associated with product liability claims in the event that the use of our products results in property damage or personal injury. The successful assertion of product liability claims against us could result in potential significant monetary damages and require us to make significant payments. If that occurs, our business and results of operation could be adversely affected.

*

Chinalco, a state-owned enterprise and our largest shareholder, as of December 31, 2008 directly owned 38.56% of our issued share capital, and indirectly owned 41.82% of our issued share capital through its controlled entities. The interest of Chinalco may conflict or even compete with our interest and that of our public shareholders. Chinalco may take actions that favor the interest of its subsidiaries, associates and other related entities over ours and that of our public shareholders. In addition, Chinalco and some of its subsidiaries and associates provide a range of services to us, including engineering and construction services, social services, land and property leasing and supply of raw and supplemental materials. Some of the services Chinalco provides to us, such as educational and medical care services for our employees, would be difficult to obtain from other sources. Our cost of operations may increase if Chinalco becomes unable to provide such services to us.

*

Chinalco has substantial financial obligations relating to the businesses, operations and personnel that it retained in the reorganization. In addition, in February 2009, Chinalco announced that it would invest US$19.5 billion in Rio Tinto Plc and Rio Tinto Limited to create a pioneering strategic alliance. While Chinalco generates significant operating revenue and receives government support, it may also rely on dividends received from us as a means of funding these obligations. Subject to the relevant provisions of the PRC Company Law and our Articles of Association, Chinalco may seek to influence our decision as to the amount of dividends we pay in order to satisfy its cash flow requirements. Any increase in our dividend payout could reduce funds available for reinvestment in our businesses and thus may materially reduce our future financial strength and adversely affect our future results of operations.

*

Our alumina, primary aluminum production and aluminum fabrication operations are subject to environmental protection laws and regulations in China, which impose such penalties as waste discharge fees, fines or closure of non-compliant plants. Each of our production plants has implemented a system to control its emissions and to oversee its compliance with PRC environmental regulations. However, the PRC government has taken steps, and may take additional steps, towards more rigorous enforcement of applicable laws, and/or adoption of more stringent environmental standards. If the PRC national or local authorities enact additional regulations or enforce existing or new regulations in a more rigorous manner, we may be required to make additional environmental expenditures, which could have a materially adverse impact on our financial condition and results of operations.

- 12 -

*

We may experience major accidents in the course of our operations, which may cause significant property damage and personal injuries. Significant industry-related accidents and natural disasters may cause interruptions to various parts of our operations, or could result in property or environmental damage, increase in operating expenses or loss of revenue. The occurrence of such accidents and the resulting consequences may not be covered adequately, or at all, by the insurance policies we carry. In accordance with customary practice in China, we do not carry any business interruption insurance or third party liability insurance for personal injury or environmental damage arising from accidents on our property or relating to our operations other than our automobiles. Losses or payments incurred by us as a result of major accidents or natural disasters may have a material adverse effect on our operating performance if such losses or payments are not fully insured.

*

We use complex equipment and facilities in our business operations, including heavy machinery. As a result, our business may be adversely affected due to the occurrence of typhoons, earthquakes, floods, fire, acts of terror or other natural disasters or similar events at our production plants. Our operations were affected by the snow storm in early 2008 and the severe earthquakes in Sichuan Province in May 2008. There are certain types of losses, such as losses from war, acts of terrorism and earthquakes, for which we cannot obtain insurance at a reasonable cost or at all. Should an accident, natural disaster or terrorist act occur, or should an uninsured loss or a loss in excess of insured limits occur, we could suffer from financial losses, as well as damage to our reputation or lose all or a portion of future revenues anticipated to be derived from the relevant facilities. Any material loss not covered by our insurance could materially and adversely affect our business, financial condition and results of operations.

*

The licenses to mine bauxite in some of our bauxite mines have expired and lapsed. While we are seeking to renew those expired licenses, we may be subject to administrative fines for operating mines without a valid license, or we may be ordered to cease our mining operations at such mines until we obtain the renewed licenses. The failure to renew those expired mining licenses may adversely affect our financial condition and results of operations.

*

Our H Shares became a Hang Seng Index constituent stock on June 10, 2008, which may attract buying interest of so-called "Hang Seng Index funds" aiming to maintain investment portfolios consistent with the Hang Seng Index. We have no control of the selection of the Hang Seng Index constituent stocks and may not be able to continue to maintain our H Shares as a Hang Seng Index constituent stock. If our H shares are deselected from the Hang Seng Index, such Funds may cease investing in our H shares, and our share price may materially decline.

*

As of May 6, 2008, 2,500,684,890 A Shares that had previously been subject to a trading moratorium became available for trading on the Shanghai Stock Exchange. If all or a significant portion of these tradable shares are offered for sale on the Shanghai Stock Exchange, the A Share price may materially decrease due to the over-supply of the A Shares on the market.

*

The interests of minority shareholders of Jiaozuo Wanfang whose A shares are listed on the Shanghai Stock Exchange may, in certain circumstances, be inconsistent with our interests and its other shareholders. Jiaozuo Wanfang must comply with a number of PRC regulations concerning the protection of the interests of its minority shareholders. For example, according to the relevant PRC laws, when shareholders of Jiaozuo Wanfang vote by poll on connected transactions, all connected parties must abstain from voting. If we are unable to obtain approval from the minority shareholders of Jiaozuo Wanfang, such transactions cannot be implemented, which may affect our overall operational efficiency. Furthermore, although our behavior towards Jiaozuo Wanfang as its controlling shareholder may be regarded as proper under the Hong Kong regulatory requirements, the minority shareholders of Jiaozuo Wanfang may take the view that they have been unfairly treated by us under their interpretation of the relevant PRC regulatory requirements. As a consequence, we may be subject to legal proceedings initiated by the minority shareholders of Jiaozuo Wanfang in the future, for reasons that are beyond our control. Such legal proceedings could result in significant damage awards payable by us and disruption to our businesses, which in turn could have an adverse effect on our business, financial condition and results of operations.

*

We are also subject to a number of risks relating to the PRC, including the following:

*

The central and local PRC governments continue to exercise a substantial degree of control and influence over the aluminum industry in China and shape the structure and characteristics of the industry by means of policies in respect of major project approvals, preferential treatments such as tax incentives and safety, environmental and quality control. If the PRC government changes its current policies or the interpretation of those policies that are currently beneficial to us, we may face pressure on profit margins and significant constraints on our ability to expand our business operations or to maximize our profitability.

*

Under current PRC regulatory requirements, the construction of new alumina refineries, the expansion of primary aluminum plants and mining projects require the government approval. If any of our important projects necessary for our growth or cost reduction are not approved, or not approved in a timely manner, our financial condition and results of operations may be materially and adversely affected.

*

A significant portion of our business, assets and operations are located in China. The economy of China differs from the economies of most developed countries in many respects. The economy of China has been transitioning from a planned economy to a market-oriented economy. Although in recent years the PRC government has implemented measures emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets and the establishment of sound corporate governance in business enterprises, a substantial portion of productive assets in China are still owned by the PRC government. In addition, the PRC government continues to play a significant role in regulating industry by imposing industrial policies. It also exercises significant control over China's economic growth through the allocation of resources, controlling payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies. Some of these measures benefit the overall economy of China, but may have a materially adverse impact on us.

*

Since 1994, the conversion of Renminbi into foreign currencies, including Hong Kong and U.S. dollars, had been based on rates set by the People's Bank of China, or PBOC, which had been set daily based on the previous day's PRC interbank foreign exchange market rate and current exchange rates on the world financial markets. On July 21, 2005, PBOC announced a reform of its exchange rate system and revalued the Renminbi. Under the reform, Renminbi is allowed to trade against a basket of foreign currencies. Since this announcement, the value of Renminbi has been fluctuating and it appreciated against the U.S. dollar by 5.7% as of December 31, 2006, approximately 11.9% as of December 31, 2007 and approximately 17.6% as of December 31, 2008. However, influenced by the international financial crisis, the exchange rate between U.S. dollar and Renminbi has become more unpredictable. Any appreciation of Renminbi in the future will increase the prices of our export sales denominated in foreign currencies and reduce the Renminbi equivalent value of our account receivables denominated in foreign currencies, which may materially and adversely affect our financial condition and results of operations. On the other hand, any devaluation of Renminbi may adversely affect the value of, and dividends payable on, our H Shares and ADSs in foreign currencies since we receive our revenue and denominate our profits in Renminbi. Our financial condition and operating performance may also be affected by changes in the value of certain currencies other than Renminbi in which our earnings and obligations are denominated. In particular, a devaluation of the Renminbi could increase the portion of our cash flow required to satisfy our foreign currency-denominated obligations.

- 13 -

*

Since 1979, many new laws and regulations covering general economic matters have been promulgated in China. Despite this activity to develop the legal system, China's system of laws is not yet complete. Even where adequate law exists in China, enforcement of existing laws or contracts based on existing law may be uncertain and sporadic, and it may be difficult to obtain swift and equitable enforcement or to obtain enforcement of a judgment by a court of foreign jurisdiction. The relative inexperience of China's judiciary in many cases creates additional uncertainty as to the outcome of any litigation. In addition, interpretation of statutes and regulations may be subject to government policies reflecting domestic political changes. These uncertainties may create situations that are not favorable to us, which may materially adversely affect our financial conditions and results of operations.

See also "Item 4. Information on the Company - Business Overview", "Item 5. Operating and Financial Review and Prospects", "Item 7. Major Shareholders and Related Party Transactions - Related Party Transactions", "Item 8. Financial Information" and "Item 11. Quantitative and Qualitative Disclosures about Market Risks".

ITEM 4.

INFORMATION ON THE COMPANY

We were incorporated as a joint stock limited company under PRC laws on September 10, 2001 under the corporate name of Aluminum Corporation of China Limited. Our scope of business includes bauxite mining, production of alumina, primary aluminum, aluminum fabrication products and ancillary products, and provision of engineering services. Pursuant to a reorganization agreement effective as of July 1, 2001 among Chinalco, Guangxi Investment, Guizhou Development and our predecessor, as well as a mining rights agreement between Chinalco and us, substantially all of Chinalco's alumina and primary aluminum production operations, operations of a research institute, as well as mining operations and mining rights of bauxite mines and other related assets and liabilities were transferred to us upon our formation.

We are currently the largest producer of alumina, primary aluminum and aluminum fabrication products in terms of production and sales volumes in China, one of the fastest growing major aluminum markets in the world. We were the third largest producer of alumina and the fourth largest producer of primary aluminum in the world in terms of production volumes for the year ended December 31, 2008. We are engaged principally in alumina refining, primary aluminum smelting and aluminum fabrication. Alumina is refined from bauxite through a chemical process and is the key raw material for producing primary aluminum, which in turn is a widely used metal and the key raw material for aluminum fabrication. Aluminum fabrication products are widely used in construction, transportation, power generation, automobile, packaging, machinery and durable goods sectors. In addition to alumina, primary aluminum and aluminum fabrication products, we also produce and sell a comparatively small amount of alumina chemical products, including alumina hydrate and alumina-based industrial chemical products, carbon products, including principally carbon anodes and cathodes, and gallium.

In 2008, we produced approximately 9.02 million tonnes of alumina, representing a year-on-year decrease of 5.7%, and approximately 1.04 million tonnes of alumina chemical products, representing a year-on-year increase of 1.5%. Our total alumina products represent approximately 42.8% of all alumina products manufactured in China during the year, making us the third largest producer of alumina in the world. The intra-company utilization ratio of alumina was increased to approximately 64.0% for 2008 from approximately 49.7% for 2007.

- 14 -

Our alumina production capacity has increased rapidly in the past few years. From 2002 to 2008, our annual alumina production capacity increased from approximately 5,410,000 tonnes to approximately 11,077,000 tonnes.

We produced approximately 3,250,000 tonnes of primary aluminum in 2008, representing a year-on-year increase of 16.1%, and our primary alumina production accounted for approximately 24.7% of China's domestic primary aluminum production for 2008. From 2002 to 2008, our annual primary aluminum production capacity increased from 750,000 tonnes to 3,991,200 tonnes.

In terms of our operations, we produced approximately 353,000 tonnes of aluminum fabrication products in 2008, representing a year-on-year increase of 341.3%. The increase was primarily due to our acquisition of five aluminum fabrication plants in May 2008. However, as these five aluminum fabrication plants and the Company were under the common control of Chinalco before and after the acquisitions, the acquisitions of the five aluminum fabrication plants were accounted for as common control business combinations, and merger accounting is applied. Accordingly, the consolidated financial statements of the Group in Item 17 have been retroactively restated to include the results of the five aluminum fabrication plants for the periods presented, including the periods before the acquisitions. For information on common control business combinations in accordance with HKFRS, see Note 5 to our consolidated financial statements.

Our key operating assets include one subsidiary mainly engaged in mining bauxite products, four integrated alumina and primary aluminum production plants, three stand-alone alumina refineries, including our joint venture Guangxi Huayin and one research institute, 13 stand-alone primary aluminum smelters, six aluminum fabrication plants and one carbon production plant. Our Research Institute also provides products for commercial sales. In addition, we are constructing one additional bauxite mining facility, two additional alumina refineries, two additional aluminum fabrication plants and one fluoride salt production facility. Most of our alumina refineries are located in reasonable proximity to abundant bauxite reserves and, as of December 31, 2008, had annual production capacities ranging from 1,200,000 tonnes to 2,217,000 tonnes. As of December 31, 2008, our primary aluminum smelters had annual production capacities ranging from 56,000 tonnes to 457,000 tonnes and our aluminum fabrication plants had annual production capacities ranging from 22,000 to 350,000 tonnes. Since December 31, 2004, all of our production facilities have been operated under the ISO 14001 standards.

In 2008, in order to further improve our product lines, reduce connected transactions as well as competition with Chinalco, and achieve greater vertical integration, we acquired five aluminum fabrication plants and a primary aluminum smelter from Chinalco and China Nonferrous Metals Technology. These acquisitions significantly increased our aluminum fabrication production capacity in 2008. In addition, we also acquired the aluminum alloy business of Pingguo Aluminum in 2008.

- 15 -

The following sets forth those of our plants acquired or newly established in 2008 that are either currently in operation or under construction:

Plants in operation

Principal products

Percentage of equity interest acquired by us

Huaxi Aluminum

aluminum fabrication products

56.86%

Chalco Ruimin

aluminum fabrication products

75%

Chalco Southwest Aluminum

aluminum fabrication products

60%

Henan Aluminum

aluminum fabrication products

84.02%

Liancheng branch

primary aluminum

100%

Plant under construction

Chalco Southwest Aluminum Cold Rolling

aluminum fabrication products

100%

- 16 -

Our principal executive office is currently located at No. 62 North Xizhimen Street, Haidian District, Beijing, 100082, People's Republic of China. Our contact telephone number is (86)10 8229 8103. Our website is www.chalco.com.cn. Information on our website does not constitute part of this annual report.

We organize and manage our operations according to our three principal business segments: alumina segment, primary aluminum segment and aluminum fabrication segment. Our alumina segment includes the production and sale of our alumina and alumina-related products, namely, alumina chemical products, including alumina hydrate, alumina-based industrial chemical products and gallium. Our primary aluminum segment includes the production and sale of our primary aluminum (including both ingots and other primary aluminum products) and aluminum-related products, namely, carbon products. Our aluminum fabrication segment includes the production and sale of aluminum fabrication products. External sales of our alumina segment, primary aluminum segments and aluminum fabrication segment accounted for approximately 18.9%, 63.1% and 14.2%, respectively, of our total revenue in 2008. Alumina is refined from bauxite through a chemical process and is the key raw material for producing primary aluminum, which in turn is a key raw material for aluminum fabrication.

Our alumina segment products consist primarily of alumina, which accounted for approximately 92.5% of our total alumina segment output based on total production volume in 2008. Other alumina segment products consist primarily of alumina chemical products, which are used in the production of chemical, pharmaceutical, ceramic and construction materials. In the process of refining bauxite into alumina, we also produce a small amount of gallium, which is a by-product and a high-value rare metal with special usage in the electronics and telecommunications industries.

Our principal primary aluminum product is ingots, which accounted for approximately 79.3% of our total primary aluminum output in 2008. Our standard ingots are 20-kilogram remelt ingots used for general aluminum fabrication primarily for the construction, power generation, automobile, packaging, machinery and durable goods sectors.

- 17 -

The carbon we produce supplies substantially all of the carbon products required for our smelters. We also sell some of our carbon products to external smelters.

Our principal aluminum fabrication products include casts, planks, screens, extrusions, forges, powder and die castings which are widely used in construction, power generation, automobile, packaging, machinery and durable goods sectors. In addition, in 2008, we constructed a production line in Chalco Qingdao to produce aluminum fabrication products with recycled aluminum materials.

The following table sets forth the production capacity of alumina, primary aluminum and aluminum fabrication products for each of our principal plants as of December 31, 2008:

Production Capacity

as of December 31, 2008

Aluminum

Fabrication

Plant

Alumina

Primary Aluminum⁽¹⁾

Products⁽²⁾

(in thousand tonnes) ⁽³⁾

Guangxi branch

1,730.0

139.5

-

Zhongzhou branch

1,830.0

-

-

Qinghai branch

-

367.0

-

Shanxi branch

2,217.0

-

-

Guizhou branch

1,200.0

403.7

-

Henan branch

2,050.0

56.0

-

Shandong branch

1,500.0

75.0

-

Shanxi Huaze

-

350.0

-

Lanzhou branch

-

428.0

-

Shanxi Huasheng

-

220.0

-

Fushun Aluminum

-

240.0

-

Jiaozuo Wanfang⁽⁴⁾

-

412.0

-

Zunyi Aluminum

-

235.0

-

Shandong Huayu

-

200.0

-

Gansu Hualu

-

160.0

-

Baotou Aluminum

-

457.0

-

Guangxi Huayin⁽⁵⁾

530.0

-

-

Research Institute

20.0

18.0

-

Liancheng branch

-

230.0

-

Northwest Aluminum

-

-

100.0

Chalco Qingdao

-

-

120.0

Chalco Southwest Aluminum

-

-

350.0

Chalco Ruimin

-

-

120.0

Henan Aluminum

-

-

270.0

Huaxi Aluminum

-

-

22.0

Total

11,077.0

3,991.2

982.0

(1)

Not including (i) Longmen Aluminum in which we hold 55% of the equity interest and (ii) aluminum alloy business of Pingguo Aluminum which we acquired in September 2008.

(2)

Not including Chalco Qingdao which completed the construction of its production line to use recycled aluminum materials to produce aluminum fabrication products with an annual capacity of 120,000 tonnes in 2008. In 2008, Chalco Qingdao commenced trial production and produced 3,100 tonnes of aluminum fabrication products.

(3)

Our production capacity takes into account designed capacity and subsequent modifications. Designed capacity is based on various assumptions including down time for ordinary maintenance and repairs and assumptions as to ore grade of bauxite used.

(4)

We hold 29% of the equity interest in Jiaozuo Wanfang. However, as we have obtained de facto control over Jiaozuo Wanfang, its results of operations were consolidated into our consolidated statements commencing on January 1, 2008. Production capacity presented above represents 100% of Jiaozuo Wanfang's smelting capacity. See Note 2(b)(i)(b) to our consolidated financial statements.

(5)

As of December 31, 2008, Guangxi Huayin was a jointly controlled entity in which we held 33% of the equity interest and we were the second largest equity holder of Guangxi Huayin. Therefore, the results of Guangxi Huayin were not consolidated into our audited financial statements in 2008. Production capacity above represents 33% of Guangxi Huayin's production capacity.

The following table sets forth, for the periods indicated, information relating to our production volumes of the alumina segment, primary aluminum segment and aluminum fabrication segment products:

Years Ended December 31

Production Volume by Product

2006

2007

2008

(in thousand tonnes, except Gallium)

Alumina segment

Alumina

8,830.0

9,573.0

9,020.4

Alumina chemical products

1,100.0

1,023.0

1,038.1

Gallium (in tonnes)

25.5

33.2

39.6

Primary aluminum segment

Primary aluminum ^{(1) (2)}

1,930.0

2,804.1

3,253.3

Carbon

1,060.0

1,291.7

1,601.3

Aluminum fabrication

Aluminum fabrication products⁽²⁾

-

80.0

353.1

-----------------------------------------------

(1)

Including ingots and other primary aluminum products.

(2)

Production volumes for 2006 and 2007 do not include the production volumes of Huaxi Aluminum, Chalco Ruimin, Chalco Southwest Aluminum, Henan Aluminum and Liancheng branch which we acquired on May 30, 2008. The Group's production volume in 2008 includes the production volumes of these four aluminum fabrication plants and one primary aluminum plant in 2008 after the acquisitions. However, as these four aluminum fabrication plants and one primary aluminum plant and the Company were under the common control of Chinalco before and after the acquisitions, the acquisitions of the five plants were accounted for as common control business combinations, and merger accounting is applied. Accordingly, the consolidated financial statements of the Group in Item 17 have been retroactively restated to include the results of the five plants together with other common control business combinations during the period for the periods presented, including the periods before the acquisitions. For information on common control business combinations in accordance with HKFRS, see Note 5 to our consolidated financial statements.

- 18 -

Alumina is produced from bauxite, an aluminum-bearing ore, through a chemical refining process. The production process to be used for producing alumina is determined by the mineral composition of the bauxite used. The production process generally includes the sintering process, the Bayer process, the hybrid Bayer-sintering process or the ore-dressing Bayer process. Most of the bauxite found in China is diasporite bauxite with high alumina content and relatively high silica content, resulting in low alumina-to-silica ratios. The Bayer process cannot efficiently refine such bauxite unless the alumina-to-silica ratio of the bauxite is sufficiently increased prior to refining. Refining low alumina-to-silica ratio bauxite generally requires the use of either the sintering process or the hybrid Bayer-sintering process, and we have developed and improved the process, which enables us to process diasporite bauxite that is generally found in China efficiently.

Primary aluminum is made from alumina through a smelting process using electrolytic reduction. The electrolytic process takes place in a reduction cell, or "pot", a steel shell lined with carbon cathodes and refractory materials. Powerful electric currents are passed through the pot to produce molten aluminum. The molten aluminum is transferred to holding furnaces and then poured directly into molds to produce foundry ingots, or further refined to form fabricating ingots. Most of the primary aluminum we produce is in the form of ingots.

The two methods commonly used to produce primary aluminum are the "pre-bake" reduction process and the "Soderberg" reduction process. Most modern aluminum production facilities adopt the pre-bake reduction. As of December 31, 2008, all of our primary aluminum capacity used pre-bake anode reduction pot-lines. In the pre-bake reduction process, the anodes are pre-formed in a separate facility where the pollutants can be contained. The cells themselves are enclosed with removable panels, so that the waste gases produced can be extracted using large exhaust fans. These gases are then treated and purified to reduce emissions of dust and fluoride to acceptable levels regulated by State environmental protection agencies.

Aluminum fabrication is made from primary aluminum. We process primary aluminum into seven major categories of aluminum fabrication products, namely, casts, planks, screens, extrusions, forges, powder and die castings. In addition, Chalco Qingdao uses recycled aluminum materials to produce aluminum fabrication products.

We operate seven principal alumina production facilities. Four of these seven refinery plants are integrated with primary aluminum smelting operations. Our total designed annual production capacity for alumina products was approximately 11.08 million tonnes as of December 31, 2008. In the fourth quarter of 2008, affected by the international financial crisis, the demand for alumina decreased significantly, and global alumina producers including us have significantly reduced their production scales and output by idling a portion of their alumina production capacity. As of December 31, 2008, 4.34 million tonnes of our alumina production capacity was not used, which accounted for 39.2% of our total alumina production capacity. In 2008, our actual production of alumina products was approximately 9.02 million tonnes of alumina and approximately 1.04 million tonnes of alumina chemical products. In 2008, we supplied approximately 5.89 million tonnes of alumina to our own smelters, and sold the remaining products to other domestic smelters. All of our alumina chemical products in the alumina segment we produced in 2008 were sold externally, either domestically or overseas for use in chemical, pharmaceutical and other industries. In addition, Our Chongqing branch and Chalco Zunyi have undertaken facility construction projects, each with designed annual capacity 800,000 tonnes. Both projects are expected to be completed in 2010.

- 19 -

As of December 31, 2008, Guangxi Huayin was a jointly controlled entity in which we held a 33% equity interest and we were the second largest equity holder of Guangxi Huayin. Therefore, the results of operations of Guangxi Huayin were not consolidated into our audited financial statements in 2008. See Note 9 to our audited consolidated financial statements. In addition, Guangxi Huayin's production volumes were not included in our production volumes for 2008.

The following table sets forth the designed annual production capacity, alumina production output, alumina chemical products production output and the utilization rate of each of our principal alumina refineries and our Research Institute as of December 31, 2008.

As of December 31, 2008

Alumina

Designed

Chemical

Annual

Alumina

Products

Production

Production

Production

Utilization

Production

Capacity ⁽¹⁾

Output

Output

Rate ⁽²⁾ (%)

Process

(in thousand tonnes, except percentages)

Shanxi branch⁽³⁾

2,217.0

1,955.7

31.6

89.3

Hybrid Bayer-sintering

Henan branch⁽³⁾

2,050.0

1,865.4

21.9

91.7

Hybrid Bayer-sintering

Shandong branch⁽³⁾

1,500.0

929.4

657.9

86.5

Sintering and Bayer

Guizhou branch

1,200.0

1,145.8

6.8

95.9

Hybrid Bayer-sintering

Zhongzhou branch⁽³⁾

1,830.0

1,806.1

235.8

107.0

Sintering and Bayer

Guangxi branch⁽³⁾

1,730.0

1,318.0

40.4

84.2

Bayer

Guangxi Huayin⁽⁴⁾

530.0

-

-

-

Bayer

Research Institute⁽³⁾⁽⁵⁾

20.0

-

43.7

122.0

Bayer

Total

11,077.0

9,020.4

1,038.1

88.0

(1)

Our production capacity takes into account designed capacity and subsequent modifications. Capacity is based on various assumptions, including down time for ordinary maintenance and repairs and assumptions as to the ore grade of bauxite used.

(2)

The capacity utilization rate is derived from the summation of (i) the production output of alumina chemical products multiplied by a quotient based on alumina content in these alumina chemical products and (ii) the production output of alumina divided by production capacity of a particular plant. Rates greater than 100% reflect the higher productivity obtained through the use of higher-grade bauxite than originally contemplated in capacity calculations.

(3)

Due to the technology upgrading of each refinery, our production capacity now exceeds our originally designed production capacity.

(4)

We hold 33% of the equity interest in Guangxi Huayin, and the designed annual production capacity represents the capacity calculated in proportion to our equity interest in this jointly controlled entity. Guangxi Huayin's production volume was not included in our production volume for 2008.

(5)

The alumina chemical products production facilities of our Research Institute are test facilities for research and development purposes. These products are sold commercially, and such sales are included in our total revenue.

To secure future bauxite and alumina supply, we have entered into agreements relating to the Aurukun bauxite and alumina project, with projected alumina production capacity of 2,100,000 tonnes per annum.

- 20 -

On March 23, 2007, we signed the Aurukun Project development agreement with the Queensland Government and entered into land use agreements with various indigenous peoples. The Queensland Government officially issued the Aurukun bauxite exploration permit to the Company in September 2007. We are currently preparing the feasibility report.

We operate 17 principal primary aluminum production facilities located in nine provinces in China. Four of these 17 smelter plants are integrated with alumina refining operations and are self-sufficient with respect to alumina supply. In addition, our Research Institute also operates a test plant that produces primary aluminum in connection with its research and development.

The total annual production capacity for primary aluminum products of all 17 of our major primary aluminum production facilities, including four integrated alumina and primary aluminum production plants and our Research Institute as of December 31, 2008 was 3,991,200 tonnes. In the fourth quarter of 2008, affected by the international financial crisis, the demand for primary aluminum decreased significantly, primary aluminum producers including us have significantly reduced their scale of production and output by shutting down a portion of their primary aluminum production capacity. As of December 31, 2008, approximately 960,000 tonnes of our primary aluminum production capacity was not used, which accounted for 24% of our total primary aluminum production capacity. In 2008, we produced approximately 3,250,000 tonnes of primary aluminum.

- 21 -

The following table sets forth the designed annual production capacity, output of primary aluminum products, the utilization rate and the smelting equipment used in each of our principal aluminum smelters and our Research Institute as of December 31, 2008:

As of December 31, 2008

Production

Aluminum

Utilization

Smelting

Plant

Capacity⁽¹⁾⁽³⁾

Output⁽³⁾

Rate⁽²⁾ (%)

Equipment⁽³⁾

(in thousand tonnes, except percentages)

Baotou Aluminum

457.0

299.6

65.6

135kA, 200kA & 240kA pre-bake

Fushun Aluminum

240.0

107.0

44.6

200 kA pre-bake

Gansu Hualu

160.0

143.9

89.9

160 kA & 210kA pre-bake

Guangxi branch

139.5

155.0

111.1

160kA &320kA pre-bake

Guizhou branch

403.7

322.7

79.9

160 kA,186kA & 230kA pre-bake

Henan branch

56.0

54.2

96.8

85kA pre-bake

Jiaozuo Wanfang

412.0

411.2

99.8

280 kA pre-bake

Lanzhou branch

428.0

404.2

94.4

75kA, 200kA & 350 kA pre-bake

Qinghai branch

367.0

390.6

106.4

160kA & 200kA pre-bake

Research Institute⁽⁴⁾

18.0

16.5

91.7

150 kA & 300kA pre-bake

Shandong Huayu

200.0

106.2

53.1

240 kA pre-bake

Shandong branch

75.0

123.0

164.0

80kA & 200kA pre-bake

Shanxi Huasheng

220.0

216.2

98.3

300 kA pre-bake

Shanxi Huaze

350.0

258.7

73.9

300kA pre-bake

Zunyi Aluminum

235.0

87.7

37.3

200 kA & 350kA pre-bake

Liancheng branch

230.0

140.6

61.1

90kA & 200kA pre-bake

Others

-

16.0

-

-

Total

3,991.2

3,253.3

81.5

(1)

Production capacity takes into account designed capacity, subsequent modifications and down time for ordinary maintenance and repairs. Our production capacity includes new projects completed in 2008.

(2)

The capacity utilization rate is determined by dividing the production output of a particular plant by that plant's production capacity.

(3)

Not including the aluminum alloy business of Pingguo Aluminum.

(4)

The primary aluminum production facilities of our Research Institute are experimental facilities for research and development purposes. Primary aluminum produced at this smelter is sold commercially, and such sales are included in our total revenue.

- 22 -

To implement our international development strategy, we initiated a research program on overseas development projects in 2004. On October 3, 2007, we entered into a memorandum of understanding ("MOU") to jointly construct a primary aluminum plant in Saudi Arabia with an annual capacity of 1,000,000 tonnes with the MMC and SBG. On November 24, 2007, the parties to the MOU officially entered into a cooperation framework agreement and received the project permit issued by the Saudi Arabia General Investment Authority. The cooperation framework agreement provides that the project will utilize our technologies and major equipment manufactured in China. On May 9, 2008, we entered into a joint venture arrangement with MMC and SBG, according to which the joint venture will be established in Saudi Arabia and will develop and operate a primary aluminum plant with a planned annual capacity of approximately 1,000,000 tonnes as well as a self-owned power plant with a planned capacity of 1,860 MW. We propose to hold 40% equity interest in the joint venture, and as a result, will become the largest shareholder. The project is located in an area with abundant low-cost energy supplies including heavy crude oil for generating electricity, where primary aluminum can be produced at a competitive cost. The project is expected to be completed in three stages. We are currently preparing the feasibility report.

We currently operate six major aluminum fabrication facilities in China, among which, five facilities were acquired from Chinalco and China Nonferrous Metals Technology on the China Beijing Equity Exchange in late May 2008. The total annual production capacity of our aluminum fabrication facilities including the five aluminum fabrication plants we acquired in May 2008 and Chalco Qingdao was 982,000 tonnes as of December 31, 2008. In 2008, we produced approximately 353,000 tonnes of aluminum fabrication products. In addition, our subsidiary Chalco Southwest Aluminum Cold Rolling has undertaken a facility construction project which is expected to be completed in 2010 and the new facility will have an annual production capacity of 250,000 tonnes of aluminum fabrication products. Our subsidiary Chalco Nanhai has undertaken a facility construction project which is expected to be completed in 2010 and the new facility is expected to have an annual production capacity of 110,000 tonnes.

The following table sets forth the designed annual production capacity, output of aluminum fabrication products, the utilization rate in each of our major aluminum fabrication plants as of December 31, 2008:

As of December 31, 2008

Annual Production Capacity

Aluminum Fabrication Product Output

Principal Products

Utilization Rate

(in thousand tonnes, except percentages)

Northwest Aluminum

100.0

60.1

planks, screens, wires, tubes and profiles

60.1%

Chalco Ruimin⁽¹⁾

120.0

56.6

planks and screens

80.9%

Huaxi Aluminum⁽¹⁾

22.0

9.5

strips and screens

74.0%

Chalco Southwest Aluminum⁽¹⁾

350.0

97.2

belts

47.6%

Henan Aluminum⁽¹⁾

270.0

120.5

planks, strips and screens

76.5%

Chalco Qingdao⁽²⁾

120.0

3.1

-

-

Others

-

6.1

-

-

Total

982.0

353.1

61.6%

(1)

Only includes its output after May 30, 2008 when it was acquired by us.

(2)

Chalco Qingdao commenced its trial production in 2008 and its output in 2008 was 3,100 tonnes.

Bauxite is the principal raw material for the production of alumina. Most of the bauxite in China is AL₂O₃.H₂O mineral, which is an uncommon kind of mineral in other parts of the world, where AL₂O₃.H₂O is prevailing. Aluminum deposits run through a broad area in central China and are especially abundant in the southern and northern parts of central China. The largest aluminum deposit lies in Shanxi Province.

Our aluminum deposits, except those of Guangxi Pingguo Mine which is an accumulation deposit due to original erosion, usually have similar stratigraphical sequences. Primary bauxite deposit, as a type of sedimentary AL₂O₃.H₂O of Carboniferous or Permian age, is contained in clay rock, limestone or coal seams. A zonary red shale is usually located at the bottom of the bauxite and the red seam distributes over the irregular "karst-type" erosion face on the top of Ordovician limestone. Aluminum deposits in northern China are usually covered with a very thick Quaternary weathering.

The thickness and quality of deposits vary with locations. Quality is usually consistent in smooth sections but changes sharply in karst "billabong" terrain. The level of hardness of minerals also varies. A sequence that includes a seam of hard bauxite of fine quality in the middle and soft bauxite of inferior quality on the bottom and top seams is common in deposits.

Generally, deposits are horizontal or with an obliquity of 0-8^o, but there are also steep deposits at an angle of 75^o, such as the Guizhou No. 2 Mine. Most of the original mineralization is not influenced by folds and faults, and some fractures of a low obliquity and folds emerge in certain deposits, which is evident in the Guizhou No. 2 Mine area where the underground mining method must be used due to the obliquity of its bauxite body reaching 70^o with the influence of folds and several meters of dislocation arising from partial faults.

The systematic and accurate method of test boring, inspection pit, trial trench, density, tonnage analysis and calculation applied to the geological work of bauxite in China is an appropriate method to analyze these types of deposits.

On average, our refineries consume approximately 2.0 tonnes of bauxite to produce one tonne of alumina. We used approximately 18,760,000 tonnes, 20,242,900 tonnes and 18,414,167 tones of bauxite in our alumina production in 2006, 2007 and 2008, respectively. In 2008, bauxite cost represented approximately 25.1%, as compared with 25.5% in 2007 of our per unit alumina production costs.

Supply. The predominant use of bauxite is for alumina production. Except for our Shandong branch, all of our refineries are located in the four provinces where over 90% of China's potentially mineable bauxite has been found. We generally source our bauxite from mines close to our refineries to save transportation costs. We procure our bauxite supply principally from three sources:

*

our own bauxite mining operations;

*

jointly operated mines; and

*

purchases from other suppliers, which principally include small independent mines and, to a lesser extent, imports.

We purchase bauxite from a number of suppliers. We are not dependent on any single supplier or a small group of suppliers for our bauxite requirements. We endeavor to explore new bauxite reserves and streamline our bauxite procurement system to support the growth of our alumina production. In 2008, we acquired three new mines. In addition, we established two new jointly-operated mines and became the sole owner of one formerly jointly owned mine, which subsequently became part of Jiaozuo mine, one of our own mines.

The combined production of our own mines and jointly operated mines was 8,288,500 tonnes in 2008, representing a decrease of 2.7% compared with the production volume in 2007. However, the production of our own mines reached 6,885,000 tonnes in 2008, representing an increase of 14.4% compared with the production volume in 2007.

- 23 -

Years Ended December 31,

2006

2007

2008

Percentage of

Percentage of

Percentage of

Total

our Total

Total

our Total

Total

our Total

Bauxite Supply

Bauxite Supply

Bauxite Supply

Bauxite Supply

Bauxite Supply

Bauxite Supply

(%)

(%)

(%)

(in thousand tonnes)

(in thousand tonnes)

(in thousand tonnes)

Our owned mines

4,115.3

21.4

4,770.2

20.3

6,885.0

30.9

Jointly operated mines

4,710.3

24.6

3,751.6

15.9

1,403.5

6.3

Other suppliers

10,343.4

54.0

15,015.8

63.8

13,992.4

62.8

Total

19,169.0

100%

23,537.6

100%

22,280.9

100%

The total designed annual production capacity of our own mines was 7.5 million tonnes as of December 31, 2008, and the total bauxite production in 2008 was approximately 6.9 million tonnes. All of our mines are accessible via railroads or highways.

Own Mines. We currently own 13 mines. As of December 31, 2008, these mines had approximately 225.5 million tonnes of aggregate proven and probable bauxite reserves as such terms are defined by the SEC. Assuming an annual mining output of 5,000,000 tonnes, the amount of bauxite reserves is sufficient to sustain our mining operations in excess of 30 years. As none of our mines produce bauxite for external sales, we are assured of full access to the bauxite produced by our own mines. In 2008, we sourced approximately 30.9% of our bauxite from mines that we own and operate. In order to obtain or retain the title to mines, we are required to comply with mining qualifications approved by the relevant Chinese authorities and pay an annual fee in amount of RMB1,000 per km2.

For the three years from 2006 to 2008, our own mines produced bauxite of 4,115,300 tonnes, 4,770,200 tonnes and 6,885,000 tonnes of bauxite, representing 21.5%, 20.3% and 30.9% of the demand from our alumina production, respectively. The following table sets forth information regarding our own mines as of December 31, 2008:

Annual Production

Mine

Location (Province)

Capacity ⁽¹⁾

Bauxite Production

(in thousand tonnes)

(in thousand tonnes)

Pingguo Mine

Guangxi Zhuang Autonomous Zone

4,080.0

2,981.5

Guizhou No.1 Mine

Guizhou Province

400.0

387.6

Guizhou No.2 Mine

Guizhou Province

520.0

499.7

Zunyi Mine

Guizhou Province

-

-

Xiaoyi Mine

Shanxi Province

1,450.0

730.3

Mianchi Mine

Henan Province

930.0

814.6

Luoyang Mine

Henan Province

1,000.0

752.0

Xiaoguan Mine

Henan Province

690.0

120.8

Sanmenxia

Henan Province

100.0

97.3

Yuzhong

Henan Province

750.0

476.9

Jiaozuo

Henan Province

80.0

24.3

Yangquan Mine

Shanxi Province

-

-

Nanchuan Mine

Chongqing City

-

-

10,000.0

6,885.0

(1)

includes the production capacities of some of jointly operated mines and the annual production capacity of our own mines was 7.5 million tonnes as of December 31, 2008.

- 24 -

The respective terms of the mining rights permit are the shorter of the estimated working life of the mine and 30 years beginning 2001. We are required to obtain mining rights permits to operate mining services. According to PRC laws and regulations, a mine owner must first prepare exploration reports of the mine and then submit those reports as part of an application to the local government for approval in order to obtain mining rights permits. If an applicant for the mining rights permit is not the owner of a mine, the applicant must first enter into an agreement with the mine owner, and then follow the foregoing procedures. The development license is subject to renewal on a regular basis. Furthermore, we are required to obtain land use rights on the land in order to operate these mines. We lease the land use rights relating to aforesaid mines from Chinalco pursuant to a land use right leasing agreement that we entered into upon our formation. Chinalco's land use rights relating to over 90% of our mining properties are for 50-year terms beginning on July 1, 2001. The remaining land use rights relating to the mines we own and operate are for shorter terms, some as short as one year. All of our land use right leasing agreements end on the expiry date of the mining rights or the end of the actual mine life, whichever is earlier. Both the land use rights and land use right leasing agreements are renewable.

Jointly Operated Mines. We currently jointly operate 17 bauxite mines. In 2008, we acquired 100% ownership of Jiyuan mine which subsequently became part of Jiaozuo mine, one of our own mines. Jointly operated mines are generally operated pursuant to long-term contractual arrangements in which we typically contribute resources such as funding, equipment, labor and management, and the other parties contribute land and/or mining rights and certain personnel resources. The other parties are also typically responsible for obtaining all relevant certificates or approvals in respect of the lands. Generally, we are able to control the mining operations of our jointly operated mines, including determination of production schedules as well as the amounts and grades of bauxite produced. As of December 31, 2008, we had obtained mining rights certificates for all of our 17 jointly operated mines. To better utilize our resources and reduce costs, we currently manage our jointly-operated mines using one of the following three methods: (i) establishing joint ventures with other companies to invest in and share resources; (ii) providing mining technology or other resources to companies with local mines in return for exclusive purchase rights to the bauxite ores; or (iii) contracting with local companies for their mining services to operate mines owned by us.

In the years ended December 31, 2006, 2007 and 2008, our jointly-operated mines produced bauxite of 4,710,300 tonnes, 3,751,600 tonnes and 1,403,500 tonnes, representing 24.6%, 15.9% and 6.3% of the demand from our alumina production, respectively.

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Jointly operated mines are typically smaller than our own mines but larger than the small independent mines in terms of reserves and production scales. Our 17 jointly operated mines had approximately 14.2 million tonnes in the aggregate of proven and probable bauxite reserves as such terms are defined by the SEC. Security of supply from jointly operated mines is contingent upon the extension or renewal of the joint operation arrangements and mining rights upon their expiration. Accordingly, we view our jointly operated mines, as a group, as a stable and long-term source of our bauxite supply, although the particular mines comprising this group may change. Jointly operated mines supplied 6.3% of our bauxite needs in 2008.

Other Suppliers. In addition to our own mines and our jointly operated mines, we also source bauxite from other suppliers. A majority of other suppliers are small independent mines. In addition, we also secure a small portion of bauxite from overseas. Bauxite secured from other suppliers accounted for 62.8% of our total bauxite supply in 2008.

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Small Independent Mines. We purchase bauxite directly from small independent mines or through local distributors that procure bauxite from these mines. Small independent mines are not affiliated with us and generally have annual bauxite production capacities not exceeding 200,000 tonnes. These mines have historically been our important source of bauxite.

Bauxite Procurement. A mineral resource department in our headquarters is responsible for the control and coordination of the supply of our bauxite. To determine how our bauxite requirement will be allocated among our principal sources each year, we first estimate our total bauxite needs for the year. Based on market conditions, production costs and other factors, we decide on the amount of bauxite that we wish to source from our own mines, and allocate the remaining requirements among the jointly operated mines and other suppliers. Our management or operational control of our own mines and jointly operated mines generally allows us to adjust the procurement levels from these sources during the course of the year to accommodate market conditions.

Alumina-to-Silica Ratio. The production method for alumina refining is determined by the mineral composition of the bauxite, as measured by reference to its alumina-to-silica ratio. Most of the bauxite reserves in China are diasporic with low alumina-to-silica ratios. Based on our current technology, an efficient application of the Bayer process requires bauxite with an alumina-to-silica ratio of 10:1 or higher, while the sintering process refine bauxite with an alumina-to-silica ratio as low as 4:1. The average alumina-to-silica ratio of the proven and probable reserves of our mines is from 6.5:1 to 7:1.

Prices. There is neither governmental regulation on bauxite prices nor an official trading market for bauxite in China. We negotiate and agree on bauxite prices with our suppliers, based on ore quality, mining costs, market conditions, transportation costs and various governmental taxes or levies, including a resource tax imposed by local governments. As we procure bauxite from three different sources, our total bauxite cost is influenced by the following factors:

*

the cost of our own mining operations;

*

the terms of our operational arrangements with respect to our jointly operated mines; and

*

the market conditions relating to purchases from small independent mines.

We purchase a significant amount of bauxite from sources other than our own mines as a means to protect the resources that we have already acquired. Additionally, in order to fully utilize our own resources, we refine all bauxite that meets the minimum technical requirements for our production of alumina. We also purchase ore of higher grades from other suppliers and blend the ore of various grades to meet the exact technical requirements for our alumina production. This practice allows for flexibility and the inclusion of isolated, poorer grade bauxite, to better utilize the available bauxite deposit.

An average of approximately 1.95 tonnes of alumina and 14,500 KWH of electricity are required to produce one tonne of primary aluminum. Alumina and electricity, the two principal components of costs in the smelting process, accounted for approximately 39.6% and 36.4%, respectively, of our unit primary aluminum production costs in 2008. Apart from alumina and electricity, we also require carbon anodes, carbon cathodes and sodium fluoride in the smelting process.

Alumina is the main raw material in the production of primary aluminum. Our Shandong, Henan, Guizhou and Guangxi branches have historically sourced all or substantially all of the alumina required for their primary aluminum production from their respective integrated refineries. All our plants which do not have integrated alumina refining operations on site have obtained alumina internally from our own alumina refineries located elsewhere.

We own 17 primary aluminum smelters in PRC, four of which are among the ten largest smelters in China. We have enhanced our competitiveness along with the development of the primary aluminum industry. In 2008, the total amount of alumina consumed by our smelters was approximately 5,770,000 tonnes, out of which we produced approximately 3,250,000 tonnes of primary aluminum. Our primary aluminum output accounted for 8.1% of the global output and 24.7% of the output in China in 2008.

The main raw material for our aluminum fabrication operations is primary aluminum. We also use other metal raw materials in aluminum fabrication depending on the type of products. We meet the primary aluminum demand of our aluminum fabrication segment with primary aluminum supplied by our own aluminum smelters. In addition, Chalco Qingdao uses recycled aluminum materials to produce aluminum fabrication products. On May 30, 2008, we acquired five aluminum fabrication plants from Chinalco and China Nonferrous Metals Technology, which increased our annual aluminum fabrication capacity to 982,000 tonnes as of December 31, 2008.

The main fuel used by our mining and manufacturing equipment is diesel. We are able to purchase diesel supplies from the public markets.

We source our water mainly from local rivers, lakes or underground.

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Electricity, coal, alkali (caustic soda or soda ash) and heavy oil are the principal items required for our alumina production. We established a supplies department in our headquarters to control and coordinate the budgeting and procurement for all major items required for our production. In addition, to raise the efficiency of materials flow, a distribution center has been set up at each production facility. However, our efforts to reduce unit costs by improving the efficiency of material supplies by the procurement system were to a certain extent offset by the significantly increased prices for coal and fuel in the market in 2008.

Electricity. Electricity is one of the principal forms of energy used in our refining process. Electricity represented approximately 7.8% of our unit alumina production cost in 2008.

To the extent that power produced by the joint operation facility is insufficient to meet a refinery's total power requirements, we purchase the shortfall from regional power grids at government-mandated rates pursuant to power supply plans. Power prices in China can vary, sometimes substantially, from one region to another, based on power production costs in the region as well as the consuming community's ability to pay. Accordingly, power costs for our various plants differ. Most of our electricity supply plans are one to three year renewable plans with regional power grids.

Coal. Large quantities of coal are used as a reducing agent and as fuel to produce steam and gas in the alumina refining process. The coal we consumed directly in the alumina refining process in 2008 represented 6.6% of our unit alumina production costs.

The construction of Zhaogu mine, a joint venture with Jiaozuo Coal (Group) Co., Ltd. ("Jiaozuo Coal") has been preliminarily completed. We hold 30% of the equity interest in Zhaogu mine while Jiaozuo Coal holds the remaining 70% of the equity interest. According to the joint venture agreement, we are entitled to all of the slack coal produced by the joint venture company.

Alkali. Alkali is used as a supplemental material in alumina refining. The sintering process and the hybrid Bayer-sintering process require soda ash while caustic soda is used in the Bayer process. We purchase all of our alkali from third party suppliers. Alkali accounted for 8.5% of our unit alumina production cost in 2008.

Fuel. Fuel is used in the calcinations of aluminum hydroxide to make alumina. Most of our refineries use heavy oil and it represented approximately 4.1% of our unit alumina production cost in 2008.

There is no governmental regulation on the prices of fuel, alkali or coal. The prices are set at market rates or through negotiations. We have not experienced difficulty in obtaining these materials in sufficient quantity and at acceptable prices.

Deliveries of raw materials and supplemental materials including fuel, are generally made on a monthly basis. Our suppliers arrange for railway transportation of these raw materials by submitting to local bureaus of the Ministry of Railways their annual and monthly transportation plans. These local bureaus then arrange for appropriate rail transportation of such raw materials or fuel to our refineries.

Electricity. Smelting primary aluminum requires a substantial and continuous supply of electricity. In 2008, we consumed 49.6 billion kWh of electricity for our primary aluminum production and the cost of electricity represented 36.4% of the unit cost of primary aluminum. Therefore, the availability and price of electricity are key considerations in our primary aluminum production. Costs of electricity have increased periodically in recent years due to severe shortages of electricity in China. In October 2007, the Chinese government issued "Notice on Further Solutions to the Difference in Electricity Rates", according to which the preferential electricity prices originally enjoyed by Chinese primary aluminum enterprises are being gradually abolished. The implementation of this Notice has increased the costs for primary aluminum enterprises in China. Accordingly, our average electricity price increased by 9.7% in 2008 from 2007. In addition, several Chinese provinces experienced power shortages in the first quarter of 2008 mainly due to damage to power lines caused by severe weather conditions. However, since October 2008, the price for electricity has been affected by the international financial crisis. The industrial demand for electricity has declined, and consequently, the electricity prices in Inner Mongolia Autonomous Region, Ningxia Hui Autonomous Region and Yunnan Province have declined, which reduced the per unit cost of primary aluminum. In addition, in 2009, in order to improve the electricity efficiency of primary aluminum producers, the State government initiated a direct electricity purchase program for 15 selected primary aluminum smelters, including Fushun Aluminum, our Liancheng branch, our Shandong branch, our Guizhou branch, our Guangxi branch, our Qinghai branch, Shanxi Huasheng, Gansu Hualu and Baotou Aluminum, which allows the selected primary aluminum smelters to purchase electricity directly from power generation enterprises. We are negotiating with relevant power generation enterprises on the terms of electricity supply under this program and if successful, we believe the electricity prices for those smelters will decrease in 2009.

We have expedited the implementation of integrated energy-saving technology, mainly by streamlining production workflow and improving our product structure. In 2008, aggregate energy consumption of primary aluminum production decreased by 3.1%, compared with 2007.

We purchase electricity from the regional power grids for our smelter operations. Prices for electricity supplied by the power grids under power supply plans are set by the government based on the power generation cost in the region and the consumers' ability to pay. Industrial users within each region are generally subject to a common electricity tariff schedule, but prices vary, sometimes substantially, across regions. Each regional power grid serves a region comprising several provinces. The regional power grids generally rely on multiple power sources to generate electricity, with coal and hydro power being the two most common sources. We believe that the different types of power sources do not imply different degrees of reliability of supply, and that our power supply from the grids is generally not reliant upon any particular generation facility supplying the grid. In addition, nine of our smelters are now allowed to purchase electricity directly from power generation enterprises.

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Electricity purchased from different power grids is subject to different tariff levels in 2008. Our smelters' average electricity cost was RMB0.394/kWh in 2008.

Carbon Products. Carbon anodes and cathodes are key elements of the smelting process. As of December 31, 2008, carbon anodes represented 14.4% of our unit primary aluminum production costs. Each of our smelters produces carbon products other than carbon cathodes, such as carbon anodes. Only our Guizhou plant has a carbon cathode production facility, which supplies all of our smelters with the carbon cathodes required and sells any excess domestically to third-party smelters.

We purchase some raw materials including bauxite, coal, fuel and alkali from outside suppliers. The amount of raw materials provided by our five largest suppliers for alumina products and primary aluminum products accounted for 10.7% and 15.6% respectively, of our total cost of raw materials for 2008. The cost of raw materials supplied by our largest supplier accounted for 5.1% and 4.7% of our total cost of raw materials for alumina and primary aluminum production, respectively, in 2008. All payments to our suppliers are in Renminbi.

We coordinate our major sales and marketing activities at our corporate headquarters. We set uniform prices for our alumina products and set minimum prices for primary aluminum products in each region where our primary aluminum products are sold. We have consolidated the networks of our branch offices to eliminate overlapping of administrative support and to reduce sales costs. In response to increasingly intensified competition, we established Shandong Alumina Chemicals Sales Department to centralize the sales of our alumina chemical products nationwide. Our subsidiaries have also played an important role in improving our after-sales services and enhancing our influence in the marketplace.

In 2003, as part of our centralized management program, we required all sales of alumina and primary aluminum to be settled upon delivery. However, as a result of tight operating cash flows, most of notes receivables were endorsed or discounted upon receipt. Our net trade receivables decreased from RMB3,718.8 million as of December 31, 2007 to RMB2,035.3 million as of December 31, 2008. Since 2004, we have required our customers to make prepayments and deposits for purchases of alumina. The total amount of deposits and prepayments received was RMB3,957 million as of December 31, 2008. We expect to continue this policy.

We sell a majority of our alumina output to third-party customers and the remaining portion to our own aluminum smelters. In 2008, we used approximately 5.8 million tonnes of alumina produced by ourselves, which represented approximately 59.2% of our total alumina production. All of our output of alumina chemical products are sold to third-party customers.

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We coordinate sales of alumina at our corporate headquarters. In the fourth quarter of each year, we organize a national alumina sales conference with our domestic primary aluminum smelter customers in order to match our supply with their requirements for the following year. At such annual conferences, based on our production capacity for the following year, we first reserve the amount of alumina needed for primary aluminum production by our smelters before we determine the amount available for sale to third party primary aluminum smelters. After that, we allocate our alumina to smelters with whom we have long-standing relationships and that have good credit and a good payment history. We consider other smelters only if we have additional alumina to allocate. Approximately 95.0% of our sales of alumina are made through these annual conferences.

Based on the sales allocations we make at the annual conference, we and our customers typically enter into one-year sales agreements that set forth their total allocation and delivery schedules. At the time of entering into these one-year sales agreements, prices are left open and determined at or near the time of delivery at the then prevailing market price. We apply uniform prices to alumina sales regardless of where the alumina is produced. If a customer does not accept our price near the time of delivery, it may refuse to take delivery despite the one-year agreement. We began selling a portion of our alumina pursuant to long-term sales contracts which have terms longer than one year in 2001. Since January 1, 2004, we have gradually entered into three to five-year sales contracts for alumina. The volume of sales to third party customers under these long-term sales contracts accounts for approximately 83.4% of the total external sales volume in 2008. Under such a long-term sales contract, the sales volume is fixed, and the price is linked to an index of three-month futures price of primary aluminum quoted at the Shanghai Futures Exchange.

We sell our alumina to smelters throughout China. Sales to our five largest third party customers accounted for 13.0%, 10.1% and 12.8% of our total alumina revenue from third party customers for 2006, 2007 and 2008, respectively. Sales to our largest customer accounted for 4.0%, 3.4% and 3.4%, respectively, of our total external alumina revenue for the same periods. All of our major third party customers in the last three years have been domestic smelters.

We sell our alumina products by way of spot sales and under long-term contracts. Pricing for our alumina products is determined by the nature of the sale as described below.

Spot sales. We set, and adjust as necessary, uniform sales prices for alumina produced by any of our refineries. In 2008, The highest and lowest spot price of domestic alumina was RMB4,500 per tonne and RMB1,850 per tonne, respectively. The annual average selling price of our alumina was RMB3,171 per tonne in 2008, representing a year-on-year decrease of 7.1%. We set uniform prices for all our sales of alumina to third party customers by reference to alumina prices at reference markets, the market supply and demand conditions, as well as our short-term and mid-term projections. Our pricing generally takes into account:

*

alumina exports into China, CIF Chinese ports;

*

international transportation costs;

*

the applicable standard PRC import tariff;

*

value-added tax at 17%;

*

import related fees; and

*

domestic supply and demand conditions.

Long-term contracts sales. Internationally, the customary practice for alumina pricing under long-term contracts is by reference to the LME prices for primary aluminum. Since January 2004, we have entered into a number of domestic long-term alumina sales contracts with three to five-year terms, under which the sales price is set as a percentage of the three-month primary aluminum prices on the Shanghai Futures Exchange. As a result, fluctuations of primary aluminum prices on the Shanghai Futures Exchange can affect our alumina prices under these long-term contracts, and the significance of such effects may increase as we increase the proportion of alumina sales under long-term contracts.

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We sell a majority of our primary aluminum output to third-party customers and the remaining portion to our own aluminum fabrication plants. In 2008, we sold approximately 3,060,000 tonnes of primary aluminum, with the average price of RMB17,231 per tonne, representing a year-on-year decrease of 12.5% from the average price of RMB19,689 per tonne in 2007.

We sell our primary aluminum through two channels:

*

Contract sales. Most of our primary aluminum sales are made pursuant to contracts entered into directly with our established customers. These may be long-term or short-term contracts.

*

Sales on the Shanghai Futures Exchange. As part of our effort to manage market risk, we sell a portion of our primary aluminum products on the Shanghai Futures Exchange through futures contracts of one to six month terms to hedge against the potential decline in primary aluminum prices.

We hold an annual regional primary aluminum sales conference in the fourth quarter of each year to coordinate the production and sales for the following year. We centrally control our product futures sales on the Shanghai Futures Exchange.

To improve the efficiency of our distribution, we divide our China market into several regions as follows:

*

southern China (including Guangdong and Fujian Provinces);

*

eastern China (including Jiangsu and Zhejiang Provinces and Shanghai Municipality);

*

southwestern China (including Sichuan Province and Chongqing Municipality);

*

the Beijing-Tianjin-Tanggu area; and

*

northeastern China (including Heilongjiang Province).

We sell a majority of our primary aluminum to domestic customers with a small amount to overseas markets. The Chinese market is our core market for primary aluminum, and we expect it to remain so for the foreseeable future. Domestic customers of our primary aluminum products principally consist of:

*

domestic aluminum fabricators that use our primary aluminum as raw material for further processing; and

*

aluminum distributors that resell our primary aluminum products to domestic aluminum fabricators or other purchasers.

Our five largest customers combined together accounted for approximately 9.0%, 12.1% and 8.9% of our total primary aluminum revenue for 2006, 2007 and 2008, respectively. Our largest customer accounted for approximately 3.0%, 3.2% and 3.0% of our total primary aluminum revenue during the same periods.

Our export operations consist of ordinary sales of our products to international customers. All export sales of our primary aluminum are sold at negotiated prices. Since August 1, 2007 exports of certain primary aluminum products have been subject to a provisional 15% export tax, and an export tax refund is available for some of our exports. Due to the small quantity of our exportation, the export tax or export tax refund does not have a substantial effect on us.

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We establish pricing guidelines for domestic sales of our own primary aluminum products, taking into account three main factors:

*

the primary aluminum spot prices on the Shanghai Futures Exchange;

*

our production costs and expected profit margins; and

*

market supply and demand conditions.

As part of our sales integration and centralization efforts, we set minimum prices with respect to each region in China where our primary aluminum is sold. These minimum prices are expressed by reference to the Shanghai Futures Exchange spot price for primary aluminum, excluding transportation. The minimum prices may differ from region to region, but all of our primary aluminum sold into a region, regardless of the plant or warehouse from which it originates or is shipped, is sold at or generally above the minimum price applicable to that region. Those of our smelters filling particular orders are principally involved in discussions with the customer as to the pricing and delivery arrangements for specific transactions. They are required to comply with the minimum pricing guidelines unless prior approval from our corporate headquarters is obtained. In general, we supply each region with products from our nearest smelters to minimize transportation costs.

We produce aluminum fabrication products based on market demand and sell all of our aluminum fabrication products to third party customers. In 2008, we sold approximately 328,000 tonnes of aluminum fabrication products. We sell most of our aluminum fabrication products domestically, with a small portion to the overseas markets. Our aluminum fabrication products enjoyed an average of 11% export tax refund which varies depending on the particular type of aluminum fabrication product. Most of our sales are based on payment within a short period after delivery. The prices for our aluminum fabrication products are set by agreement with our customers.

Alumina chemical products and gallium are intermediate products of, or otherwise related to, our alumina production. Our production levels for these products are based on market demand for them. We sell all of our alumina chemical products and gallium to third party customers, mostly domestically but some internationally. Prices for our alumina chemical products and gallium are set according to market demand or by agreement with our customers.

Delivery of alumina is made from our refineries by rail or truck. Our sales price is normally exclusive of transportation costs. For long-distance delivery, we have spur lines connecting our plants to the national railway routes. We are responsible for the maintenance of these spur lines. The price of shipping on the national railway system is fixed by the government.

Our primary aluminum products are transported to our customers mostly by rail. In view of the substantial distances that separate our smelter plants from southern and eastern China where most of the aluminum fabrication plants are concentrated, we have subsidiaries (often with warehousing capacity leased from third parties) in major cities in eastern and southern China to facilitate deliveries and coordination.

Our customers are responsible for the shipment for most sales of aluminum fabrication products.

Our core facilities include 17 principal production plants and our Research Institute. Set forth below is a plant-by-plant description of our principal operating facilities. Our production operations are organized and managed according to our three business segments, alumina, primary aluminum and aluminum fabrication products.

The Guangxi branch commenced operations in 1994 and is located in the Guangxi Zhuang Autonomous Region in southwestern China, an area rich in bauxite resources. The Guangxi branch receives bauxite for production via highway from the Pingguo mine located in Guangxi Pingguo.

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Our Guangxi branch is situated within 17 kilometers of our own mines that contain large, easily exploitable high alumina-to-silica ratio bauxite reserves. The Guangxi branch is our only principal refinery that uses the Bayer method exclusively. With imported European technology and production equipment, our Guangxi refinery features a high level of automation and energy efficiency. Since its inception, we have increased Guangxi branch's original designed production capacity by removing production bottlenecks and expanding its capacity. As of December 31, 2008, its production capacity reached 1,730,000 tonnes of alumina per annum after the completion of the Phase III construction project in July 2008, which increased the annual alumina production capacity of Guangxi branch by 880,000 tonnes. In 2008, our Guangxi branch produced 1,318,000 tonnes of alumina and 40,400 tonnes of alumina chemical products. Most of its alumina output is used in the primary aluminum smelter at our Guangxi branch and the remainder is sold to third party smelters.

Our Guangxi branch also uses advanced 160 kA and 320 kA pre-bake reduction pot-lines developed by ourselves for its primary aluminum production. As of December 31, 2008, the branch's primary aluminum production capacity reached 139,500 tonnes of primary aluminum per annum. In 2008, our Guangxi branch produced 155,000 tones of primary aluminum.

Our primary aluminum production facilities in Guizhou Province, which possesses integrated alumina and primary aluminum production facilities, commenced operations in 1966.

Our Guizhou alumina refinery commenced operations in 1978 and has one of the most advanced facilities of its kind in China, as many of its key technologies and equipment are imported. It uses the hybrid Bayer-sintering process for its alumina production and relies on our own mines as well as third party suppliers for bauxite supply. Bauxite from our own nearby mines is delivered to the refinery by cable cars and train. Its alumina output is mostly used in the primary aluminum production at the same plant and the remainder is sold to third party smelters. As of December 31, 2008, the production capacity of our Guizhou branch reached 1,200,000 tonnes of alumina per annum. Our Guizhou branch uses 160 kA, 186kA and 230 kA pre-bake reduction pot-lines in its primary aluminum production. As a result of technological innovations and overhauls since its inception, our Guizhou smelter plant is among the most technologically advanced smelters in China. As of December 31, 2008, the annual production capacity of primary aluminum of our Guizhou branch was 403,700 tonnes. In 2008, our Guizhou branch produced 1,145,800 tonnes of alumina, 6,800 tonnes of alumina chemical products and 322,700 tonnes of primary aluminum.

Our Guizhou branch also contains a modern carbon production facility which produces carbon anodes as well as carbon cathodes. It is our only facility that produces carbon cathodes and supplies all of the carbon cathodes required by seven of our facilities and our Research Institute. Its carbon cathodes are also sold to third party customers throughout China.

Our Henan branch is located in Zhengzhou, Henan Province, a province rich in bauxite resources. Bauxite is delivered to our Henan Branch for production via railway and highway from the following mines: Xiaoguan mine located in Zhengzhou, Luoyang mine in Luoyang, Mianchi mine in Mianchi, Yuzhong mine in Zhengzhou, Sanmenxia mine in Sanmenxia and Jiaozuo mine in Jiaozuo. Its alumina and primary aluminum production commenced in 1966 and 1967, respectively. Our Henan branch was the first refinery in China to develop the hybrid Bayer-sintering process. We commenced the operation of a new alumina production line in February 2004 using the ore-dressing Bayer process that we have developed in recent years to refine low alumina-to-silica ratio bauxite. Since its inception, the Henan branch's production facilities have undergone substantial technological upgrades, based on equipment imported from Germany and Denmark. The refinery has also benefited from its access to high alumina-to-silica ratio bauxite from our own mines and through local market purchases. Its alumina output is first used to satisfy its primary aluminum production, and the remainder is sold to our other smelters and third party customers. The designed annual production capacity of alumina of our Henan branch was 2,050,000 tonnes as of December 31, 2008. In 2008, our Henan branch produced 1,865,400 tonnes of alumina and 21,900 tonnes of alumina chemical products.

We upgraded a portion of the primary aluminum facilities at this branch, which now utilizes 85 kA pre-bake reduction pot-lines. Its carbon plant produces high quality carbon products for sales to third party customers in China as well as for export, after meeting the needs of our various smelting operations. As of December 31, 2008, Henan branch's annual primary aluminum production capacity reached 56,000 tonnes. In 2008, our Henan branch produced 54,200 tonnes of primary aluminum.

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The Shandong branch commenced operations in 1954 and has the capacity to produce both alumina and primary aluminum. Bauxite is delivered to our Shandong branch for production via railway and highway from the Yangquan mine in Shanxi Yangquan. Its refinery was China's first production facility for alumina. Both the refinery and smelter are owned and operated by Shandong Aluminum, which became our wholly-owned subsidiary after our A Shares issuance and exchange on April 30, 2007. It produces the majority of its alumina through the sintering process, but has a small production line to produce alumina through the Bayer process using imported bauxite. During 2002, the Bayer production line was converted into an ore-dressing sintering operation. The Shandong branch purchases the majority of the bauxite required for its production from small third party mines in Henan and Shanxi Provinces. Its alumina output is first used to satisfy its primary aluminum production, and the remainder is sold to our other smelters as well as third party customers. As of December 31, 2008, the annual capacity of alumina of our Shandong branch reached 1,500,000 tonnes and it produced 929,375 tonnes of alumina in 2008.

In addition, our Shandong branch also produces substantial amounts of alumina chemical products. It is the largest and most technologically advanced alumina chemical products production facility, and produces the most varieties of these products in China. Alumina chemical products produced by our Shandong branch are used in the jewelry, ceramics and other industries. Its alumina chemicals products are sold both domestically and internationally. In 2008, our Shandong branch produced 657,900 tonnes of alumina chemical products.

Our Shandong branch's primary aluminum operations have undergone technological and equipment upgrades, with the majority of its original equipment having been replaced by more advanced equipment. As of December 31, 2008, our Shandong branch's primary aluminum production capacity reached 75,000 tonnes of primary aluminum per annum and it produced 123,000 tonnes of primary aluminum in 2008.

Located in Qinghai Province, our Qinghai branch is a stand-alone primary aluminum production facility and is also China's second largest smelter in terms of production capacity. This branch commenced operations in 1987 and is one of the most technologically advanced primary aluminum smelters in China. It operates 160 kA automated pre-bake anode reduction pot-lines that were developed domestically. It benefits from relatively low electricity costs in Qinghai Province resulting from substantial hydroelectric power stations in the region. Historically, the branch has relied on our Shanxi, Shandong, Henan and Zhongzhou branches for its alumina supply. Because of its relatively remote location, it incurs higher average transportation costs for both raw materials and its primary aluminum products than our other branches. The Qinghai branch's designed annual production capacity of primary aluminum was 367,000 tonnes in as of December 31, 2008. In 2008, our Qinghai branch produced 390,600 tonnes of primary aluminum.

Our Shanxi branch commenced operations in 1987 and is located in Shanxi Province, a province with rich bauxite deposits in China. Bauxite is transported to our Shanxi branch for production via railway and highway from the Xiaoyi mine in Shanxi Province. Our Shanxi branch is a stand-alone alumina plant and is currently China's largest alumina plant in terms of production capacity.

Our Shanxi branch's production facilities are primarily imported and are more technologically advanced than our other domestic alumina refineries. Shanxi branch relies on bauxite from our own mines as well as third party suppliers. Due to its close proximity to large coal mines and substantial water resources, it currently has the largest power generation capacity amongst our alumina manufacturing facilities. The total alumina production capacity of our Shanxi branch reached 2,217,000 tonnes as of December 31, 2008. Our Shanxi branch produced 1,955,700 tonnes of alumina and 31,600 tonnes of alumina chemical products in 2008.

Situated in Henan Province, our Zhongzhou branch is a stand-alone alumina plant, located near bauxite, coal and water supplies. It commenced operations in 1993 and is equipped with imported and self-developed technology and has undergone various improvements and upgrades, including improved sintering technology. We purchase bauxite supplies from Henan and Shanxi Provinces.

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Its production capacity reached 1,830,000 tonnes of alumina per annum as of December 31, 2008. Our Zhongzhou branch produced 1,806,100 tonnes of alumina and 235,800 tonnes of alumina chemical products in 2008.

Our Lanzhou branch is situated in Lanzhou city in Gansu Province and is a stand-alone primary aluminum plant. It was part of Lanzhou Aluminum before July 2007 which we acquired through share exchange in April 2007. In July 2007, Lanzhou Aluminum was divided into two wholly-owned entities: Lanzhou branch and Northwest Aluminum. Our Lanzhou branch owns a primary aluminum smelting plant with a designed annual production capacity of approximately 428,000 tonnes as of December 31, 2008. It produced 404,200 tonnes of primary aluminum in 2008.

Jiaozuo Wanfang is situated in Jiaozuo city in Henan Province and is a stand-alone primary aluminum plant. Jiaozuo Wanfang was established in 1993, whose shares were listed on the Shenzhen Stock Exchange in 1996. In May 2006, we entered into a Sale and Purchase Agreement with Jiaozuo Wanfang Group to acquire 29% of the issued share capital, or 139,251,064 State-owned legal person shares held by Jiaozuo Wanfang Group in the issued share capital of Jiaozuo Wanfang and thus became its largest shareholder. In 2008, we obtained de facto control over Jiaozuo Wanfang and accordingly, it became our subsidiary.

Jiaozuo Wanfang had an annual production capacity of 412,000 tonnes of primary aluminum as of December 31, 2008 and produced 411,200 tonnes of primary aluminum in 2008.

Shanxi Huaze is situated in Shanxi Province. On March 30, 2003, we established the joint venture company, Shanxi Huaze, with Zhangze Electric Power to commence the construction of a primary aluminum production facility. Following the completion of its capacity expansion in June 2008, Shanxi Huaze's designed annual production capacity of primary aluminum reached 350,000 tonnes as of December 31, 2008 and it produced 258,700 tonnes of primary aluminum in 2008.

Shanxi Huasheng Aluminum is situated in Shanxi Province. On December 6, 2005, we entered into a joint venture agreement with Guan Lv, to establish a joint venture company, Shanxi Huasheng. The joint venture company commenced operations in March 2006. Its designed annual production capacity of primary aluminum reached approximately 220,000 tonnes as of December 31, 2008. In 2008, Shanxi Huasheng produced 216,200 tonnes of primary aluminum. The joint venture company has a total investment of RMB2,379.4 million and a registered capital of RMB1,000 million, of which we committed RMB510 million. We currently hold a 51% equity interest in Shanxi Huasheng.

Zunyi Aluminum is situated in Guizhou Province. In June 2006, we entered into a share purchase agreement with Guizhou Wujiang Hydropower Development Co., Ltd. and eight other companies, which are the shareholders of Zunyi Aluminum, to purchase part of the equity interest from Guizhou Wujiang Hydropower Development Co., Ltd. and all the equity interest held by the other eight companies. We have completed our purchase and currently hold 61.29% of the equity interest in Zunyi Aluminum. Following the completion of a new primary aluminum project with production capacity of 125,000 tonnes in August 2008, Zunyi Aluminum's primary aluminum annual production capacity reached 235,000 tonnes as of December 31, 2008 and it produced 87,657 tonnes of primary aluminum in 2008.

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Fushun Aluminum is situated in Liaoning Province, and is a stand-alone primary aluminum plant. In March 2006, we entered into a share transfer agreement with Liaoning Fushun Aluminum Plant to acquire 100% of the equity interests in Fushun Aluminum for a consideration of RMB500 million. Fushun Aluminum's primary business is the production of primary aluminum and carbon products. With the partial completion of a new primary aluminum project at the end of 2008 which increased the primary aluminum production capacity of Fushun Aluminum by 100,000 tonnes, Fushun Aluminum's annual primary aluminum production capacity reached 240,000 tonnes as of December 31, 2008. Fushun Aluminum produced 107,000 tonnes of primary aluminum in 2008.

Shandong Huayu is situated in Shandong Province and is a stand-alone primary aluminum plant. In July 2006, we entered into a share transfer agreement with Shandong Huasheng Jiangquan Group to acquire 55% of the equity interest of Shandong Huayu, a subsidiary of Shandong Huasheng Jiangquan Group. After the completion of its expansion plan in 2008, Shandong Huayu's annual primary aluminum production capacity reached 200,000 tonnes as of December 31, 2008. It also has supporting facilities and two 135MW coal-fired generators. In 2008, Shandong Huayu produced 106,200 tonnes of primary aluminum.

Gansu Hualu is situated in Gansu Province, and is a stand-alone primary aluminum plant. In August 2006, we entered into a share transfer agreement with Baiyin Nonferrous Metal (Group) Co., Ltd. ("Baiyin Nonferrous") and Baiyin Ibis Aluminum Co., Ltd. ("Baiyin Ibis"). Baiyin Nonferrous contributed 127,000 tonnes of primary aluminum smelting and supporting facilities owned by Baiyin Ibis as capital contribution and holds a 49% equity interest in Gansu Hualu, a subsidiary of Baiyin Ibis, and we hold 51% of the equity interest in Gansu Hualu. The joint venture had a designed annual production capacity of 160,000 tonnes of primary aluminum as of December 31, 2008 and produced 143,900 tonnes of primary aluminum in 2008.

Baotou Aluminum is located in Inner Mongolia Autonomous Region, and is a stand-alone primary aluminum plant. On December 28, 2007, through A Shares issuance and exchange for Baotou Aluminum shares, we acquired 100% of the equity interest of Baotou Aluminum. Baotou Aluminum had a designed annual production capacity of 457,000 tonnes as of December 31, 2008 with the completion of its expansion projection at the end of 2008 which increased the annual primary aluminum production capacity by 150,000 tonnes. In 2008, it produced 299,600 tonnes of primary aluminum.

Liancheng branch is located in Gansu Province. In late May, 2008, we acquired 100% of the equity interest of Liancheng Longxing Aluminum Company Limited from Chinalco on the China Beijing Equity Exchange and subsequently turned it into our Liancheng branch which specializes in producing primary aluminum. As of December 31, 2008 Liancheng branch had an annual primary aluminum production capacity of 230,000 tonnes and produced 140,618 tonnes of primary aluminum in 2008.

Located in Qingdao, Shandong Province, Chalco Qingdao specializes in using recycled aluminum materials to produce aluminum fabrication products with recycled aluminum. In 2008 it commenced trial production following the completion of the construction of its production line to use recycled aluminum to produce aluminum fabrication products. As of December 31, 2008, Chalco Qingdao had an annual production capacity of 120,000 tonnes and produced 3,100 tonnes of aluminum fabrication products in its trial production.

Northwest Aluminum is situated in Lanzhou city in Gansu Province and is an aluminum fabrication plant. It was part of Lanzhou Aluminum before July 2007 which we acquired through share exchange in April 2007, whose A Shares were listed on Shanghai Stock Exchange until April 24, 2007, when we acquired Lanzhou Aluminum through share exchange. In July 2007, Lanzhou Aluminum was divided into two wholly-owned entities: Lanzhou branch and Northwest Aluminum. Northwest Aluminum has an annual production capacity for aluminum fabrication products of approximately 100,000 tonnes as of December 31, 2008 and produced 60,146 tonnes of aluminum fabrication products in 2008.

Located in Fujian, Chalco Ruimin commenced production in 1996 and specializes in aluminum fabrication. In late May 2008, we purchased 75% of the equity interest of Chalco Ruimin from Chinalco on the China Beijing Equity Exchange. As of December 31, 2008, Chalco Ruimin had an annual aluminum fabrication capacity of 120,000 tonnes and it produced 56,600 tonnes of aluminum fabrication products in 2008. Chalco Ruimin has undertaken an expansion plan which is expected to be completed in 2009 and we expect the completion of this project to increase Chalco Ruimin's aluminum fabrication capacity by 250,000 tonnes.

Located in Chengdu, Sichuan Province, Huaxi Aluminum commenced production in 1997 and specializes in aluminum fabrication. In late May 2008, we purchased 56.86% of the equity interest of Huaxi Aluminum from Chinalco on the China Beijing Equity Exchange. As of December 31, Huaxi Aluminum had an annual aluminum fabrication production capacity of 22,000 tonnes and it produced 9,500 tonnes of aluminum fabrication products in 2008.

Established in September 2004 and located in Chongqing, Chalco Southwest Aluminum specializes in aluminum fabrication. On May 30, 2008, we purchased 60% of the equity interest of Chalco Southwest Aluminum from Chinalco on the China Beijing Equity Exchange. As of December 31, Chalco Southwest Aluminum had an annual aluminum fabrication production capacity of 350,000 tonnes and produced 97,200 tonnes of aluminum fabrication products in 2008.

Established in August 2005 and located in Luoyang, Henan Province, Henan Aluminum specializes in aluminum fabrication. In late May 2008, we acquired 84.02% of the equity interest of Henan Aluminum from Chinalco and China Nonferrous Metals Technology on the China Beijing Equity Exchange. As of December 31, 2008, Henan Aluminum had an annual aluminum fabrication production capacity of 270,000 tonnes and produced 120,500 tonnes of aluminum fabrication products in 2008.

Established in August 1965 and located in Zhengzhou, Henan Province, the Research Institute specializes in aluminum smelting-related research and development. It is the only research institute in China dedicated to light metals research, and has played a key role in bringing about technological innovations in China's aluminum industry. The Research Institute is central to our research and development efforts. The Research Institute operates test facilities, which produce alumina chemical products and primary aluminum. It also provides research and development services to third parties on a contractual basis. Approved by the Ministry of Science and Technology of the PRC in December 2003, Research Institute established National Research Center of Aluminum Refinery Technologies and Engineering. As of December 31, 2008 our Research Institute has an annual alumina production capacity of 20,000 tonnes and annual primary aluminum production capacity of 18,000 tonnes. In 2008, our research Institute produced 16,500 tonnes of primary aluminum.

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As the largest producer of alumina in China, we believe that we will not face significant competition from domestic alumina producers in the immediate future for the following reasons:

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a new producer would need access to a substantial and stable supply of bauxite as well as approval from relevant department under the State Council of China;

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we are experienced in alumina production and our production technologies are specifically adapted to the particular chemical composition of bauxite found in China;

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we have strong capacity in technology research and hold certain proprietary technologies and patents;

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we have a large number of professionals who have extensive experience in production and management in this area;

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we are supported by the state policy.

In 2008, global alumina output reached approximately 79.18 million tonnes, representing an increase of 6.2% over 2007 and global consumption of alumina reached approximately 78.07 million tonnes, representing an increase of 4.5% over 2007. Since the fourth quarter of 2008, affected by the decrease in demand from primary aluminum producers as a result of the international financial crisis, global alumina producers have reduced their production. As of the end of 2008, approximately 9.8% of the global alumina production capacity was idled, while in China, 24.4% of the production capacity was idled. Due to the decrease in demand, the annual average price of imported alumina in 2008 was US$357 per tonne, representing a year-on-year decrease of 9.2% compared with 2007. The annual average selling price of our alumina in 2008 was RMB3,171 per tonne, representing a year-on-year decrease of 7.1% compared with 2007. In 2008, our alumina production represented approximately 36.5% of the total domestic consumption and approximately 42.8% of the total domestic output of alumina.

In order to improve the efficiency and competitiveness of the Chinese alumina industry as well as to protect the environment, the National Development and Reform Commission of China ("NDRC") published "Entrance Conditions for Aluminum Industry" (the "Entrance Conditions") in November 2007. According to the Entrance Conditions, new bauxite projects must be approved by the provincial authority or the relevant department of the State Council of China depending on the amount of total investment, and any new alumina project must be approved by the relevant department of the State Council of China. The Entrance Conditions also provide detailed requirements for capital size, service period and resource utilization rate for a new bauxite or alumina project to be approved. The Entrance Conditions has established a high entry barrier for new alumina producers in China.

We believe that we have competitive advantages over our foreign competitors in the China alumina market. As a local supplier situated in close proximity to our customers, we do not incur international transportation and import-related costs and enjoy stable long-term relationships with our customers in a vast and growing market. Our competitive advantages may be reduced if international suppliers of alumina can offer alumina in China at prices below ours. As a result of China's accession to the WTO on December 11, 2001, competition from international suppliers of alumina may increase as tariff and non-tariff barriers for imported alumina are significantly reduced. The standard tariff on imports of alumina into China was reduced to nil on January 1, 2008. In addition, the value-added tax on imports of bauxite into China was increased from 13% to 17% on January 1, 2009.

Over 90% of our primary aluminum revenue is derived from sales in China. Our competitors include other domestic smelters and international producers that sell primary aluminum into China. In 2008, our primary aluminum production represented approximately 26.0% of total domestic consumption.

There are approximately 83 primary aluminum smelting companies operating in China, which sell substantially all of their products in China. We are the largest integrated alumina and primary aluminum producer in China, and Baotou Aluminum, our Guizhou branch, Jiaozuo Wanfang and our Lanzhou branch operate four of the ten largest smelters in China. Our smelters altogether accounted for 24.7% of the domestic primary aluminum production for 2008. Currently, only 19 primary aluminum producers in China (including Chalco) have annual production capacities of 300,000 tonnes or more which have approximately 55% of the total primary aluminum production capacity in China and only 10 primary aluminum producers in China (including Chalco) have annual production capacity of 500,000 tonnes or more. Most smelters have smaller production capacities. It is the PRC government's industrial policy to consolidate the Chinese primary aluminum industry into an industry that consists of larger, less polluting and more efficient producers. Accordingly, the larger smelters are being granted favorable treatment, including priority in the allocation of raw materials and electricity supplies. These preferential treatments give large domestic smelters a stronger competitive advantage over small domestic smelters. Moreover, according to the Entrance Condition, effective from November 2007, any new aluminum projects must be approved by the relevant department of the State Council of China and must have a secured alumina supply. In addition, for the moment, the relevant department of the State Council is not expected to approve any new aluminum projects except those environmental protection upgrade projects and expired equipment exchange projects specially planned by the PRC government.

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Although we face competition from other large domestic smelters, we have several advantages over such competitors, including:

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Scale of production. With 17 primary aluminum facilities, we can achieve significant economies of scale. In addition, our scale of production enables us to achieve high production volumes in order to fill large customer orders and maintain a large customer base. Through our national distribution network, we are able to make timely deliveries to customers from our local warehouses.

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Technology. We believe we have more sophisticated and efficient technology than most of our domestic competitors. Our Guangxi, Guizhou and Qinghai branches are among the most technologically advanced primary aluminum smelting facilities in China. In addition, our technological support and research and development capabilities are superior to other domestic smelters.

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Vertical integration. As the largest integrated alumina and primary aluminum producer in China, we are able to supply alumina internally to our 17 primary aluminum plants. As a result, we save on transportation, warehousing and related costs. In addition, because we operate our own alumina refineries, we are able to assure a stable supply of alumina for our primary aluminum smelting operations. Since 2006, we have captured the market opportunity and expanded our primary aluminum business by mergers and acquisitions. We acquired seven primary aluminum plants in 2006 and 2007, which significantly improved our own utilization rate of the alumina we produced. In 2008, we acquired Liancheng Longxing Aluminum Company Limited, which increased our total annual primary aluminum production capacity by 230,000 tonnes.

*

Quality. The quality of our primary aluminum is generally higher than that of the primary aluminum produced by most of our domestic competitors. The primary aluminum produced by most of our smelters has satisfied the quality standards of the London Metal Exchange, or LME, and we are registered for trading on the LME.

Over 90% of our aluminum fabrication products revenue is derived from sales in China. Our competitors include other domestic aluminum fabrication products producers and international producers that sell aluminum fabrication products into China.

There are approximately 1,030 aluminum fabrication producers in China with an aggregate annual capacity of 17.5 million tonnes as of the end of 2008. In 2008, the aluminum fabrication producers in China produced approximately 14 million tonnes of aluminum fabrication products.

The tariff rate for alumina and primary aluminum imports was reduced to nil on January 1, 2008 and August 1, 2007, respectively. In 2008, China imported approximately 4,580,000 tonnes of alumina, representing a 12.4% decrease from 2007. China had net import of approximately 10,300 tonnes of primary aluminum in 2008, representing a 79.1% decrease from 2007. Competition from international suppliers of alumina and primary aluminum is expected to increase. Such competitors are likely to be large, efficient international companies. Some competitors may also consider establishing joint venture companies with local producers in China to gain access to the resources in China and to lower transportation costs. However, certain PRC governmental policies directed at promoting the growth of larger domestic smelters are likely to be retained, and the PRC government encourages large domestic smelters to explore overseas markets.

Our research and development efforts over the years have facilitated the expansion of our production capacity and reduced our unit production costs. We have successfully commercialized our previous research and development results in various technologies. In 2008, we spent RMB178 million on research and development. We made significant progress in research and development of new methods and technologies in 2008. We completed 125 technological projects, including 65 technology development projects, 26 industrialization and promotion and application of advanced technologies projects and 34 basic application projects. We were recognized as one of the "innovative enterprises" by the Ministry of Science and Technology, the State Council's Asset Supervision and Administration Commission and the All China Federation of Trade Unions. Our modernized hot rolling technologies and craftsmanship for aluminum and aluminum alloy project received the National Technology Advancement Award in 2008. Moreover, the Group's self-developed techniques including the new bauxite processing techniques and equipment, the new techniques for highly effective and energy-saving alumina production and the latest technique of structural port for aluminum smelting will be promoted and applied so as to alleviate the pressure of resource shortages and tight energy supply. The "3-dimensional refinements" which is currently being promoted in aluminum smelters of the Group, can effectively boost the strength of the electrical current. We filed a total of 308 patent applications in 2008.

As of December 31, 2008, we owned 635 patents. The major registered patents relate primarily to technologies and know-how, equipment and new products. Once registered, a patent in China for a new invention is valid for 20 years and for a new function or a new design is valid for 10 years from the date of the patent application.

As of December 31, 2008, we owned 26 trademarks, which are used to identify our businesses and products. The trademarks have a term of 10 years. We have entered into a Trademarks License Agreement with Chinalco for the non-exclusive use by Chinalco of two of our trademarks relating to aluminum fabrication.

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Although the PRC has been steadily amending its patent, trademark, and license laws to comply with various international agreements, its laws are still evolving. In its current form, Chinese intellectual property law differs from United States intellectual property law in many significant ways. For instance, the State Intellectual Property Office of the PRC may grant a compulsory license on a patent if it is unable to obtain a license from the patent owner for reasonable terms and within a reasonable time frame. Chinese patent law also provides immunity from damages for an entity that uses or sells a patented product without knowing that it was made or sold without the patentee's permission so long as it proves that the infringing product was obtained from a legitimate source. United States patent law does not offer such provisions. Chinese law also awards patents on a first-to-file system as opposed to the United States' first-to-invent system. Chinese trademark law is similarly based on a first-to-register system as opposed to the United States' first-to-use system.

Moreover, the PRC government and its courts have limited experience in enforcing its intellectual property laws. The current PRC patent and trademark laws have only been in effect for approximately 20 years. Courts in China do not have the same level of experience in enforcing and interpreting intellectual property laws as the courts in the United States. However, the PRC government has created administrative bureaus to resolve administrative and judicial matters relating to patent and trademark infringement disputes. These administrative bureaus also have the power to order an infringing party to cease and desist from such use.

We do not regard any single patent, license, or trademark to be material to our sales and operations as a whole. We have no material patents, licenses, or trademarks the duration of which cannot, in the judgment of our management, be extended as necessary. We are neither involved in any material intellectual property disputes against us nor are we pursuing any legislation relating to intellectual property rights against any party.

We are subject to PRC national environmental laws and regulations as well as environmental regulations promulgated by the local governments where we operate. These include regulations on waste discharge, land repair, emissions disposal and mining control. For example, national regulations promulgated by the PRC government set discharge standards for emissions into the air and water. National environmental protection enforcement authorities also promulgate discharge fees for various waste substances. These schedules usually provide for discharge fee increases for each incremental increase of the amount of discharge up to a specified level set by the PRC government or the local government. For any discharge exceeding the specified level, the relevant PRC government agencies may order any of our facilities to rectify certain behavior causing environmental damage, and subject to PRC government approval, the local government has the authority to order any of our facilities to close for failure to comply with existing regulations.

Our bauxite mining operations are subject to relevant environmental laws and regulations promulgated by national and local governments, including regulations on waste discharge, land repair, emission management and mining control.

The pollutants discharged from our alumina refining process include red mud, waste water and waste emission of gases and dust. Our primary aluminum production process generates fluorides, pitch fume and dust. It is illegal for such waste to be released into the atmosphere without first being processed. Once processed, the amount of pollutants that can be released is subject to national or local discharge limits.

Each of our alumina refineries and primary aluminum smelters has its own waste treatment facilities on site or has developed other methods to dispose of the industrial waste. In 2008, our Shandong, Henan, Shanxi, Guizhou, Zhongzhou, Guangxi, Qinghai and Lanzhou branches were awarded by local governments for outstanding performance in environmental protection.

We have improved our energy-efficiency by applying new production techniques and new technologies and optimizing our production process. In 2008, our comprehensive energy consumption of alumina production decreased by 5.41%, our comprehensive alternating current consumption of primary aluminum production decreased by 0.26%, which equals an average decrease of 37.2 kWh per tonne and energy consumption of aluminum ingots decreased by 3.14 kg standard coal/per tonne compared with 2007. We have saved 3,600,000 tonnes of standard coal through our energy saving efforts since we were established eight years ago. We have replaced outdated technology and processes with clean technology and processes and been promoting the concept of "zero emission plant" and the technology of zero emission of waste water. We have invested a total of RMB490 million on 13 waste water treatment projects, and have basically achieved zero waste water emission.

Our total expenditures for environmental protection was RMB105.5 million, RMB533.0 million and RMB629.0 million for the years ended December 31, 2006, 2007 and 2008, respectively. We were granted ISO 14001accreditations issued by The International Certification Network on December 31, 2004. We believe that our operations are substantially in compliance with currently applicable national and provincial environmental regulations.

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We currently maintain insurance coverage on our property, plant and equipment, our transportation vehicles and various assets that we consider to be subject to significant operating risks. However, there are certain types of losses, such as losses from war, acts of terrorism and natural disasters such as earthquakes, for which we cannot obtain insurance at a reasonable cost or at all. Natural disaster such as typhoons, tornados, floods, landslides and lighting strikes are within our insurance coverage and can be reasonably compensated by insurance companies if our losses are more than RMB10,000.

We paid a total of RMB61.5 million, RMB62.4 million and RMB68.6 million in insurance premiums in 2006, 2007 and 2008, respectively.

We are covered under the injury and accidental death insurance provided by the local government labor departments and do not purchase separate insurance policies from commercial insurers with respect to such risks.

Consistent with what we believe to be the customary practice in China, we generally do not carry any third party liability insurance to cover claims in respect of personal injury, environmental damage arising from accidents on our property or relating to our operations (other than our automobiles) or business interruption insurance. More extensive insurance is either unavailable in China or would impose a cost on our operations that would reduce our competitiveness with other producers.

Our business is not seasonal.

Producers of alumina and primary aluminum are subject to national industrial policies and relevant laws and regulations in areas of environmental protection, import and export, land use, foreign investment regulation and taxation. We are also subject to regulations relating to activities such as mining.

We are principally subject to governmental supervision and regulation by two agencies of the PRC government:

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the NDRC, which sets and implements the major policies concerning China's economic and social development, approves investments exceeding certain amounts, coordinates and improves the reform of the economic system, and formulates industrial policies and investment guidelines for all industries including the aluminum industry; and

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the Ministry of Land and Resources of the People's Republic of China, which has the authority to grant land use licenses and mining right permits.

The following is a brief summary of the principal laws, regulations, policies and administrative directives to which we are subject.

Any capital markets financing activities by an enterprise or company incorporated in PRC, for example, those to finance capital projects, are subject to approval by securities regulatory authorities and other relevant authorities in China, regardless of whether the funds are raised in China or on the international capital markets. An issuer incorporated in the PRC must obtain prior approval from the CSRC for issuance of equity securities or equity-linked securities. Offerings of bonds in PRC by a listed company incorporated in the PRC are subject to approval from the CSRC, while offering of bonds in PRC by other enterprises are subject to approval from the People's Bank of China, as well as the NDRC, or their competent local authorities. Offering of bonds outside the PRC are subject to approval from the NDRC and/or the State Administration of Foreign Exchange. For all international financing activities through issuance of bonds, the issuer must register with the administrative authorities of foreign exchange.

Foreign investment in the exploring and mining of alumina and primary aluminum is permitted by the PRC government.

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"Entrance Conditions for Alumina Industry" provides that, (i) all new bauxite projects must be approved by relevant authorities at the provincial governments, with an exception for those projects with a total investment over RMB500 million, for which the approval from the competent authority under the State Council is required. In addition, all new bauxite projects should have an annual production capacity of not less than 300,000 tonnes with a service period of over 15 years; (ii) all new alumina projects must obtain approval from the State Council. Alumina projects which consume domestic bauxite mines must have an annual production capacity of over 800,000 tonnes and service duration of bauxite mines must exceed 30 years. Alumina projects which consume imported bauxite mines must have an annual production capacity of over 600,000 tones and have reliable bauxite supply. Raw materials supplied under long-term purchase agreements with terms of over five years must exceed 60% of the total raw material demand; (iii) all new aluminum projects must be approved by the State Council. In near future, approval will only be granted to environmental protection upgrade projects and those projects under state plan to replace out-of-date equipments. All update or replacement project must have reliable alumina supply, power supply and transportation access.

The PRC government does not impose any limitations with respect to the pricing of alumina, primary aluminum and related products. Thus, alumina and primary aluminum producers are free to set prices for their products. All the raw materials, supplemental materials and other supplies that we purchase are based on market prices. Freight transportation on the national railway system is subject to government mandated pricing.

The State Electricity Regulatory Commission of the People's Republic of China is responsible for the supervision and administration of the power industry in China. The NDRC and local governments regulate electricity pricing. Electricity suppliers may not change their electricity prices without governmental authorization.

The Electric Power Law of the People's Republic of China and related rules and regulations govern electricity supply and distribution. Currently, China's state-owned power companies, through their respective local subsidiaries, operate all the regional power grids in China from which we obtain most of our electricity requirements. In October 2007, Chinese government issued "Notice on Further Solutions of the Difference in Electricity Rates", according to which the preferential electricity prices originally enjoyed by Chinese primary aluminum enterprises are being gradually abolished.

The import taxes on alumina and primary aluminum were reduced to nil on January 1, 2008 and August 1, 2007, respectively. The export tax rate for certain primary aluminum products was increased to 15% August 1, 2007. In addition, under the PRC government directive, effective from August 22, 2005 we no longer import alumina for processing trade.

The Ministry of Environmental Protection of the People's Republic of China is responsible for uniform supervision and control of environmental protection in China. It formulates national environmental quality and discharge standards and monitors China's environmental system. Environmental protection bureaus at the county level or above are responsible for environmental protection within their respective jurisdictions.

Environmental regulations require companies to file an environmental impact report with the relevant environmental bureau for approval before undertaking the construction of a new production facility or any major expansion or renovation of an existing production facility. New facilities built pursuant to this approval are not permitted to operate until the relevant environmental bureau has performed an inspection and is satisfied that the facilities are in compliance with environmental standards.

The Environmental Protection Law requires any facility that produces pollutants or other hazards to incorporate environmental protection measures in its operations and establish an environmental protection responsibility system. Such system includes adoption of effective measures to control and properly dispose of waste gases, waste water, waste residue, dust or other waste materials. Any entity that discharges pollution must register with the relevant environmental protection authority.

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Penalties for breaches of the Environmental Protection Law include a warning, payment of damages and imposition of a fine. Any entity undertaking a construction project that fails to install pollution prevention and control facilities in compliance with environmental standards for a construction project may be ordered to suspend production or operations and may be fined. Criminal liability may be imposed for a material violation of environmental laws and regulations that causes loss of property or personal injuries or death.

All mineral resources in China are owned by the State under the current Mineral Resources Law. Exploration, exploitation and mining operations must comply with the relevant provisions of the Mineral Resources Law and are under the supervision of the Ministry of Land and Resources. Exploration and exploitation of mineral resources are also subject to examination and approval by the Ministry of Land and Resources and relevant local authorities. Upon approval, a mining permit or exploitation permit is issued by the relevant administrative authorities, which are responsible for supervision and inspection of mining exploitation in their jurisdiction. Annual reports are required to be filed by the holders of mining rights with the relevant administrative authorities.

The PRC government permits mine operators of collectively owned mines to exploit mineral resources in designated areas and individuals to mine scattered mineral resources. Such mine operators and individuals are subject to government regulation. Mining activities by individuals are restricted. Individuals are not permitted to exploit mineral reserves allocated for exploitation by a mining enterprise or company, or specified minerals prescribed by the State for protective mining. Indiscriminate mining that damages mineral resources is prohibited.

If mining activities result in damage to arable land, grassland or afforested area, the mining operator must take measures to return the land to an arable state within the prescribed time frame. Any entity or individual which fails to fulfill its remediation obligations may be fined and denied application for land use rights for new land by the relevant land and natural resources authorities.

It is unlawful for an entity or individual to conduct mining operations in areas designated for other legal mining operators. A mining operator whose exploitation causes harm to others in terms of production or in terms of living standards is liable for compensation and is required to take necessary remedial measures. When a mine is closed, a mine closure report and information concerning the mining facilities, hidden dangers, remediation and environmental protection must be submitted for examination and approval in accordance with the relevant PRC law and regulations.

The mineral products illegally extracted and the income derived from such activities may be confiscated and may result in fines, revocation of the mining permit and, in serious circumstances, criminal liability.

In March 2007, the PRC government promulgated the Enterprise Income Tax Law which became effective from January 1, 2008. The Enterprise Income Tax Law imposes a single income tax rate of 25% on both domestic and foreign invested enterprises. The Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises (the "FIE and FE tax laws") and Provisional Regulations of the PRC on Enterprise Income Tax were abolished simultaneously. The Enterprise Income Tax Law provides for a 5-year transitional period for those entities that applied FIE and FE tax laws in previous years. On December 6, 2007, PRC government promulgated the Enterprise Income Tax Law Implementation Rules which also became effective on January 1, 2008.

We are organized as a joint stock limited company under PRC law. As of December 31, 2008, Chinalco, Baotou Group, Lanzhou Aluminum Factory, Guiyang Aluminum Magnesium Design and Research Institute and public shareholders owned 38.56%, 2.60%, 0.58%, 0.03% and 58.23%, respectively, of our issued share capital.

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In late May, 2008, we acquired 56.86% of the equity interest in Huaxi Aluminum, 75% of the equity interest in Chalco Ruimin, 100% of the equity interest in Chalco Southwest Aluminum Cold Rolling and Liancheng Longxing Aluminum Company Limited, 60% of the equity interest in Chalco Southwest Aluminum, 71.01% of the equity interest in Henan Aluminum from Chinalco and 13.01% of the equity interest in Henan Aluminum from China Nonferrous Metals Technology on the China Beijing Equity Exchange. In addition, we also acquired the aluminum alloy business of Pingguo Aluminum in 2008.

Chinalco leases to us 459 pieces or parcels of land, located in eight provinces, covering an aggregate area of approximately 61.9 million square meters for the purposes of all aspects of our operations and businesses. The leased land mainly consists of:

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449 pieces of allocated land with an area of approximately 61.0 million square meters, on which Chinalco has obtained authorization from the relevant administrative authorities to manage and lease the land use rights; and