Aluminum of China (AOC) Risk Analysis
Risk Overview Q4, 2022
Source: the company's latest filing for the period ended Dec 31, 2022, filed Apr 25, 2023
Risk Change Over Time
- Share Price & Shareholder Rights - Risk 1We voluntarily delisted our ADSs from the NYSE, which could reduce the liquidity and market price of our ADSs and underlying shares.
Our Board approved the voluntarily withdrawal of our ADSs from listing on the NYSE, primarily due to a number of considerations, including the limited trading volume of the ADSs of the Company as compared to the worldwide trading volume of H shares of the Company, and the considerable administrative burden and costs associated with maintaining the listing of the ADSs on the NYSE and the registration of the ADSs and the underlying H shares with the SEC and complying with the periodic reporting and related obligations under the Exchange Act. We filed a Form 25 with the SEC on August 22, 2022 in order to delist our Shares from the NYSE, which occurred ten days thereafter upon effectiveness of the Form 25. Accordingly, our last day of trading on the NYSE was September 1, 2022. Our ADSs are currently traded on the OTC Market and our ticker symbol was changed from "ACH" to "ACHHY." In light of the delisting, we subsequently delivered a termination letter to the depositary for our ADSs, for the termination of our ADS program on March 30, 2023. Our ADS program is expected to be terminated on June 30, 2023. The delisting of our shares from the NYSE could negatively impact us because it could: (i) reduce the liquidity and market price of our ADSs, (ii) reduce the number of investors willing to hold or acquire our ADSs, which could negatively impact our ability to raise equity financing, and (iii) impair our ability to raise additional necessary capital through equity or debt financing in the United States if needed in the future. Trading on the OTC Market may be volatile and sporadic, which could depress the market price of our ADSs. Selling our ADSs on the OTC Market could be more difficult because smaller quantities of ADSs would likely be bought and sold, transactions could be delayed, and security analysts' coverage of us may be reduced. In addition, broker-dealers have certain regulatory burdens imposed upon them, which may discourage broker-dealers from effecting transactions in our ADSs, further limiting the liquidity of our ADSs. As a result, the market price of our ADSs may be depressed, and as a result it may be more difficult to sell our ADSs. Additionally, we intend to file a Form 15F with the SEC to deregister our ADSs and the underlying ordinary shares under the Exchange Act once we have met the criteria for deregistration. Thereafter, all of our reporting obligations under the Exchange Act will be suspended unless the Form 15F is subsequently withdrawn or denied. Deregistration of ADSs and the underlying ordinary shares and termination of our reporting obligations under the Exchange Act are expected to become effective 90 days after the filing of Form 15F with the SEC. Once the Form 15F is filed, we will publish the information required under Rule 12g3-2(b) of the Exchange Act on our website, www.chalco.com.cn. We will also continue to comply with our financial reporting and other obligations as a listed issuer on the Hong Kong Stock Exchange.
- Accounting & Financial Operations - Risk 2Changes in facts and circumstances may adversely affect our ability to exercise control over Yunnan Aluminum.
Although we own shares representing 29.10% of total issued share capital at Yunnan Aluminum, we concluded that we exercise "de facto control" based on the following facts: (i) the percentage and concentration of our voting rights, (ii) the record of attendance to Shareholders' Meetings and the record of votes cast by the other shareholders; and (iii) the effective control exercised by us to direct Yunnan Aluminum's relevant activities. As some of these facts are out of our control, a change in the fact pattern that we assessed might derive in a loss of control over Yunnan Aluminum, leading to deconsolidation from an accounting perspective.
Risk Highlights Q4, 2022
Risk Word Cloud
Risk Factors Full Breakdown - Total Risks 41
- Manufacturing - Risk 1Failure to maintain optimal utilization of our production facilities will adversely affect our gross and operating margins.
During the past few years, we expanded the production capacity by completing our construction, upgrading or remolding of some of our alumina and primary aluminum production facilities. If we are able to maintain satisfactory facility utilization rates and increase our production output, this increase in our production output would enable us to reduce our unit costs through economies of scale, as fixed costs will be spread over a higher volume of output units. Conversely, underutilization of our existing and newly acquired or constructed production facilities may increase our marginal production costs and prevent us from realizing the intended economic benefits of our expansion. Since 2013, we have implemented flexible production arrangements from time to time for certain alumina and primary aluminum production facilities in response to prevailing market conditions and government policies. For example, as affected by the market environment, Zhongzhou Aluminum and Xinghua Technology started to implement flexible production arrangements for alumina production in the fourth quarter of 2022. We may also capitalize on fluctuating market prices to increase trading of alumina and primary aluminum and to enhance resource planning to achieve cost savings in our production. The increase in our external purchases will reduce our utilization of certain production facilities, but may not result in a proportionate decrease in fixed costs such as leases and depreciation of plant, property and equipment. If we fail to maintain optimal utilization rates and spread fixed costs over a high volume of output units, our gross and operating margins may be adversely affected.
- Manufacturing - Risk 2Our business involves inherent risks and occupational hazards, which could damage our reputation, subject us to liability claims and cause substantial costs to us.
Our business involves inherent risks and occupational hazards. Under our mining operations, we engage or may engage in certain inherently risky and hazardous activities, including, among others, operations at height or on dangerous terrains, underground excavation and construction, use of heavy machinery, mining and handling of flammable and explosive materials, and we are therefore subject to risks associated with these activities, including, among others, geological catastrophes, toxic gas and liquid leakages, equipment failures, industrial accidents, fire, explosions and underground water leakages. Although we conduct geological assessments on mining conditions and adapt our mining plans to the mining conditions at each mine, we cannot assure you that adverse mining conditions will not endanger our workforce, increase our production costs, reduce our bauxite or coal output or temporarily suspend our operations. The occurrence of any of the foregoing events or conditions could have a material adverse impact on our business and results of operations. Additionally, we are exposed to operational risks associated with industrial or engineering activities, such as maintenance problems or equipment failures. These risks and hazards may result in personal injury and fatal casualties, damage to or destruction of properties or production facilities, and pollution and other environmental damage. Any of these consequences, to the extent they are significant, could result in business interruption, possible legal liability and damage to our business reputation and corporate image. Our mines and operating facilities may be damaged by water, gas, fire or cave-ins due to unstable geological structures. Any significant accident, business disruption or safety incident could result in substantial uninsured costs and the diversion of our resources, which could materially and adversely affect our business operations and financial condition.
- Manufacturing - Risk 3Failure to discover new reserves or resources, maintain or enhance existing reserves or resources, develop new mining operations or expand our current mining operations could negatively affect our business, financial condition and results of operations.
Mining exploration is unpredictable in nature. The success of any mining exploration program depends on various factors, many of which are beyond our control. Due to the unpredictable and speculative nature of the mining industry, there is no assurance that any exploration program that we are currently undertaking or may undertake in the future will result in the discovery of valuable reserves or resources. There is no assurance that reported resources can be converted into reserves. Furthermore, actual results upon production may differ from those anticipated at the time of discovery. To access additional reserves in explored areas, we will need to successfully complete development projects, including but not limited to extending existing mines and developing new mines. There are a number of uncertainties inherent in the development and construction of any new mine or an extension of an existing mine, including but not limited to (i) the availability and timing of necessary governmental approvals; (ii) the timing and cost necessary to construct mining and processing facilities; (iii) the availability and cost of labor, utilities, auxiliary materials and other supplies and the accessibility of transportation and other infrastructure; and (iv) the availability of funds to finance construction and production activities. There is no assurance that any future exploration activities or development projects will extend the life of our existing mining operations or result in any new economic mining operations and such failure may have a material adverse effect on our business, financial condition and results of operations.
- Manufacturing - Risk 4Our mining operations have limited mine lives and eventual closure of these operations will entail costs and risks regarding ongoing monitoring, rehabilitation and compliance with environmental standards.
Our existing mining operations in the PRC and overseas have limited mine lives and will eventually be depleted. We need to perform certain procedures to remedy and rehabilitate the environmental and social impact that our mining operations have had on local communities and the environment. Remediation, rehabilitation, closure and removal of our facilities will incur various costs and are subject to various risks. The key costs and risks for mine closures include, among others, (i) long-term management of permanent engineered structures and acid rock drainage; (ii) closure in accordance with local or international environmental standards; (iii) orderly retrenchment of employees and third-party contractors; and (iv) orderly transfer of the site, its associated permanent structures and community development infrastructure and programs to new owners. There is no assurance that such closure of mines will be successful and without delays or additional costs, in which case we may be subject to increased costs, penalties or other legal or administrative actions, damages to reputation, or even suspension and cancellation of mining permits, the occurrence of which would cause a material adverse effect on our business, financial condition and results of operations.
See a full breakdown of risk according to category and subcategory. The list starts with the category with the most risk. Click on subcategories to read relevant extracts from the most recent report.