Midas share price dropped by 7.5% today

Midas shrs fall as Chinalco buys into China alloy firm, Sept 4 (Reuters) - Aluminum Corp of China, or Chinalco, has paid 1.2 billion yuan ($159.1 million) for a 75 percent stake in Northeast Light Alloy Co Ltd, state media and company officials said on Tuesday, apparently beating out a Singaporean firm. The news caused a 9.5 percent drop in shares of Singapore-listed Midas Holdings , which last year had announced its intention to form a joint venture to run NELA, China's largest manufacturer of aluminium and magnesium alloy. "We have not received any official notification. We are checking with the relevant authorities and will make the necessary announcements when we have an update," a Midas spokeswoman told Reuters when asked about the Chinalco deal and the status of the proposed joint venture. Midas said last September it would form a joint venture with three local government investment arms and state-owned nickel firm Jinchuan Group Ltd. that would "leverage on the production facilities, market presence and production capabilities of the existing Northeast Light Alloy Co. Ltd." "Midas had a plan to form a joint venture but it never materialized. The decision (to sell to Chalco) was taken by the assets supervision commission and the Harbin government," an official surnamed Rong at NELA's board office told Reuters. Midas planned to inject 300 million yuan for a 30 percent stake. The venture would construct a new plant to manufacture super large special aluminium plates and sheets, Midas said in a press release on Sept. 12, 2006. Founded in the 1950s, NELA had 1.089 billion yuan in sales in the first half of 2007, but only 51 million yuan in net profit. It makes aluminium and magnesium alloy for military and civilian use, as well as processing machinery. "(The news) indicates that the Chinese government wishes to keep NELA solely in domestic hands (as NELA supplies significantly to the military) and that they are not prepared for foreign participation in NELA," DBS Vickers Securities analyst Paul Yong wrote in a research note on Tuesday. The failure of the joint venture would cut Midas's forecast earnings per share for fiscal year 2008 by 10 percent, Yong said. He maintained his 'buy' rating but reduced his target price for the stock to S$1.84-$2.06 a share. Midas shares ended down 8.7 percent on Tuesday at S$1.37 a share, after falling 9.5 percent to S$1.33 a share during the day. Following the sale to Chinalco, the remainder of the company's 1.6 billion yuan of assets is held by an arm of the government of Harbin, in China's far northeast, the China Daily reported on Tuesday. State-owned Chinalco is China's largest aluminium producer and the parent of Aluminum Corp of China Ltd, or Chalco <2600.hk><601600.ss>. Midas supplies aluminium alloy extrusion production to infrastructure firms in China, and has a joint venture in Nanjing.