CORPORATE INFORMATION

Registered name

:

(Chinese characters)

Name in English

:

Aluminum Corporation of China Limited

Registered address

:

No. 12B Fuxing Road

Haidian District, Beijing

People's Republic of China 100814

Place of business

:

No. 12B Fuxing Road

Haidian District, Beijing

People's Republic of China 100814

Principal place of business

:

Unit 3103, 31/F., Office Tower,

    in Hong Kong

Convention Plaza

1 Harbour Road

Wanchai, Hong Kong

Authorised representative

:

Xiao Yaqing

Company Secretary

:

Liu Qiang

Department for corporate

:

Secretarial Office to the Board

    information and inquiry

Telephone for corporate

:

(86) 10 6398 5654

    information and inquiry

Places of listing

:

The Stock Exchange of Hong Kong Limited ("HKSE")

New York Stock Exchange, Inc ("NYSE")

Name of share

:

Chalco

Stock code

:

2600 (HKSE)

ACH (NYSE)

The Board of Directors of Aluminum Corporation of China Limited (the "Company") is pleased to announce the unaudited interim results of operations of the Company, its subsidiaries, and jointly controlled entities (the "Group") for the six months ended June 30, 2005, and would like to express our gratitude to our shareholders and the staff for their support for the Company.

The consolidated turnover of the Group for the six months ended June 30, 2005 amounted to RMB17,849million, representing an increase of 25.65% over the same period last year. The consolidated net profit attributable to shareholders of the Company for the six months ended June 30, 2005 amounted to RMB3,554million, representing an increase of 1.78% over the same period last year. The basic earnings per share was RMB0.32 for the six months ended June 30, 2005.

CONDENSED CONSOLIDATED BALANCE SHEET

AS OF JUNE 30, 2005

As restated

Unaudited

Audited

As of

As of

June 30,

December 31,

2005

2004

Note

RMB'000

RMB'000

Assets

Non-current assets

    Property, plant and equipment

4

37,024,146

34,026,233

    Land use rights

4

15,898

16,048

    Intangible assets

4

760,231

729,153

    Interest in jointly controlled entities

65,783

66,877

    Interest in associated companies

5

866,685

45,000

    Investments in securities

-

10,800

    Available for sale financial assets

10,305

-

    Deferred tax assets

298,318

307,370

    Other long-term receivables

107,797

-

39,149,163

35,201,481

Current assets

    Inventories

5,858,429

5,231,907

    Accounts receivable, net

6

2,142,981

1,965,127

    Held-to-maturity investments

11,035

10,860

    Other current assets

889,742

924,932

    Cash and cash equivalents

5,348,628

6,223,763

14,250,815

14,356,589

Total assets

53,399,978

49,558,070

CONDENSED CONSOLIDATED BALANCE SHEET (CONTINUED)

AS OF JUNE 30, 2005

As restated

Unaudited

Audited

As of

As of

June 30,

December 31,

2005

2004

Note

RMB'000

RMB'000

Equity

Share capital and reserves

    Share capital

11,049,876

11,049,876

    Reserves

8,696,143

8,696,143

    Retained earnings

        Proposed dividend

-

1,944,778

        Unappropriated retained earnings

9,429,815

5,875,998

29,175,834

27,566,795

    Minority interests

1,386,183

1,239,083

Share capital and reserves

7

30,562,017

28,805,878

Liabilities

Non-current liabilities

    Long-term deposits payable

399,028

-

    Long-term loans

8

8,283,382

7,391,663

    Deferred tax liabilities

171,850

167,054

8,854,260

7,558,717

Current liabilities

    Accounts payable

9

2,011,258

2,047,831

    Other payables and accruals

4,784,517

5,544,568

    Taxation payable

701,815

1,078,508

    Current portion of long-term loans

8

1,374,525

1,073,658

    Short-term bonds

10

1,945,567

-

    Unsecured short-term loans

3,166,019

3,448,910

13,983,701

13,193,475

Total liabilities

22,837,961

20,752,192

Share capital, reserves and total liabilities

53,399,978

49,558,070

Net current assets

267,114

1,163,114

Total assets less current liabilities

39,416,277

36,364,595

CONDENSED CONSOLIDATED PROFIT AND LOSS ACCOUNT

FOR THE SIX MONTHS ENDED JUNE 30, 2005

Unaudited

As restated

Six months

Six months

ended June 30,

ended June 30,

2005

2004

Note

RMB'000

RMB'000

Turnover

11

17,848,749

14,205,165

Cost of goods sold

(11,771,655)

(8,579,287)

Gross profit

6,077,094

5,625,878

Other gains, net

11

93,222

22,484

Selling and distribution expenses

12

(319,495)

(298,060)

General and administrative expenses

13

(606,816)

(523,925)

Research and development expenses

(52,413)

(58,090)

Operating profit

5,191,592

4,768,287

Finance costs

14

(181,370)

(32,890)

Operating profit after finance costs

5,010,222

4,735,397

Share of profit of an associated company

7,798

-

Share of loss of jointly controlled entities

(1,094)

(695)

Profit before income taxes

5,016,926

4,734,702

Income taxes

17

(1,334,374)

(1,077,784)

Profit for the period

3,682,552

3,656,918

Attributable to:

    Shareholders of the Company

3,553,817

3,492,322

    Minority interests

128,735

164,596

3,682,552

3,656,918

Basic earnings per share for profit attributable

RMB

RMB

    to shareholders of the Company

18

0.32

0.32

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2005

Unaudited

Six months ended June 30, 2005

Attributable to shareholders of the Company

Minority interests

Statutory

Statutory

Share

Capital

surplus

public

Retained

Total

capital

reserve

reserve

welfare fund

earnings

equity

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

As of January 1, 2005,

    as previously reported

11,049,876

6,204,045

1,277,789

1,214,309

7,410,124

-

27,156,143

As of January 1, 2005,

    as previously separately

    reported as minority interests

-

-

-

-

-

1,239,083

1,239,083

Effect after adopting HKAS23

-

-

-

-

410,652

-

410,652

As of January 1, 2005,

    as restated

11,049,876

6,204,045

1,277,789

1,214,309

7,820,776

1,239,083

28,805,878

Profit for the period

-

-

-

-

3,553,817

128,735

3,682,552

Capital contributions

-

-

-

-

-

99,000

99,000

Dividend paid

-

-

-

-

(1,944,778)

(80,635)

(2,025,413)

As of June 30, 2005

11,049,876

6,204,045

1,277,789

1,214,309

9,429,815

1,386,183

30,562,017

Unaudited

Six months ended June 30, 2004

Attributable to shareholders of the Company

Minority interests

Statutory

Statutory

Share

Capital

surplus

public

Retained

Total

capital

reserve

reserve

welfare fund

earnings

equity

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

As of January 1, 2004,

    as previously reported

10,499,900

3,493,594

592,682

563,017

3,593,148

-

18,742,341

As of January 1, 2004,

    as previously separately

    reported as minority interests

-

-

-

-

-

651,928

651,928

Effect after adopting HKAS23

-

-

-

-

232,456

-

232,456

As of January 1, 2004,

    as restated

10,499,900

3,493,594

592,682

563,017

3,825,604

651,928

19,626,725

Profit for the period

-

-

-

-

3,492,322

164,596

3,656,918

Dividend paid

-

-

-

-

(1,060,788)

-

(1,060,788)

Issue of new shares

    at premium

549,976

2,750,672

-

-

-

-

3,300,648

Share issue expenses

-

(49,998)

-

-

-

-

(49,998)

As of June 30, 2004

11,049,876

6,194,268

592,682

563,017

6,257,138

816,524

25,473,505

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

FOR THE SIX MONTHS ENDED JUNE 30, 2005

Unaudited

Six months ended June 30,

2005

2004

RMB'000

RMB'000

Net cash inflow from operating activities

3,061,002

2,788,844

Net cash used in investing activities

(4,864,986)

(3,808,094)

Net cash inflow from financing activities

928,849

2,763,132

(Decrease) / increase in cash and cash equivalents

(875,135)

1,743,882

Cash and cash equivalents at beginning of the period

6,223,763

2,596,440

Cash and cash equivalents at end of the period

5,348,628

4,340,322

Analysis of balances of cash and cash equivalents:

    Bank balances and cash, not pledged

5,348,628

4,423,088

    Less: term deposits with initial term of over three months

-

(82,766)

Bank balances and cash

5,348,628

4,340,322

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

1

Basis of preparation and accounting policies

These unaudited condensed interim consolidated financial statements are prepared in accordance with Hong Kong Accounting Standard ("HKAS") 34: "Interim Financial Reporting" issued by the Hong Kong Institute of Certified Public Accountants ("HKICPA").

These condensed interim consolidated financial statements should be read in conjunction with the 2004 annual financial statements.

The accounting policies and methods of computation used in the preparation of these condensed interim consolidated financial statements are consistent with those used in the annual financial statements for the year ended December 31, 2004 except that the Group has changed certain of its accounting policies following its adoption of new / revised Hong Kong Financial Reporting Standards and Hong Kong Accounting Standards ("new HKFRS") which are effective for accounting periods commencing on or after January 1, 2005.

The changes to the Group's accounting policies and the effect of adopting these new policies are set out in note 2 below.

2

Changes in accounting policies

(a)

Effect of adopting new HKFRS

In 2005, the Group adopted the new HKFRS below, which are relevant to its operations. The 2004 comparatives have been amended as required, in accordance with the relevant requirements.

HKAS 1

Presentation of Financial Statements

HKAS 2

Inventories

HKAS 7

Cash Flow Statements

HKAS 8

Accounting Policies, Changes in Accounting Estimates and Errors

HKAS 10

Events after the Balance Sheet Date

HKAS 16

Property, Plant and Equipment

HKAS 17

Leases

HKAS 21

The Effects of Changes in Foreign Exchange Rates

HKAS 23

Borrowing Costs

HKAS 24

Related Party Disclosures

HKAS 27

Consolidated and Separate Financial Statements

HKAS 28

Investments in Associates

HKAS 31

Investments in Joint Ventures

HKAS 32

Financial Instruments: Disclosures and Presentation

HKAS 33

Earnings per Share

HKAS 36

Impairment of Assets

HKAS 38

Intangible Assets

HKAS 39

Financial Instruments: Recognition and Measurement

HKAS-Int 12

Scope of HKAS - Int 12 Consolidation - Special Purpose Entities

HKAS-Int 15

Operating Leases - Incentives

HKFRS 3

Business Combinations

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

2

Changes in accounting policies (CONTINUED)

(a)

Effect of adopting new HKFRS (continued)

The adoption of new / revised HKASs 1, 2, 7, 8, 10, 16, 21, 24, 27, 28, 31, 33, HKAS-Int 12 and HKAS-Int 15 did not result in substantial changes to the Group's accounting policies. In summary:

-

HKAS 1 has affected the presentation of minority interest, share of net after-tax results of associates and jointly controlled entities and other disclosures.

-

HKASs 2, 7, 8, 10, 16, 27, 28, 31, 33, HKAS-Int 12 and HKAS-Int 15 had no material effect on the Group's accounting policies.

-

HKAS 21 had no material effect on the Group's accounting policy. The functional currency of each of the consolidated entities has been re-evaluated based on the guidance to the revised standard. All the Group entities have the same functional currency (Renminbi ("RMB")) as the presentation currency for respective entity financial statements.

-

HKAS 24 has affected the identification of related parties and some other related-party disclosures.

HKAS17 has affected the property, plant and equipment and land use rights disclosures. Land use rights and property, plant and equipment are separately disclosed under the new requirement. The up-front prepayments made for the land use rights are expensed in the profit and loss account on a straight-line basis over the period of the lease. In prior years, land use rights were stated at cost less accumulated amortization and accumulated impairment loss.

The adoption of HKAS 23 has resulted in a change in accounting policy relating to the capitalization of borrowings costs. Borrowing costs capitalized are those costs that would have been avoided if the expenditure on the qualifying asset had not been made, which are either the actual costs incurred on a specific borrowing or an amount calculated using the weighted average method, considering all the general borrowings outstanding. In prior years, borrowing costs were capitalized to the extent that funds are borrowed specifically for the purpose of obtaining a qualifying asset.

The adoption of HKFRS 3, HKAS 36 and HKAS 38 results in a change in the accounting policy for goodwill. Until December 31, 2004, goodwill was:

-

Amortized on a straight line basis over a period not more than 20 years; and

-

Assessed for an indication of impairment at each balance sheet date.

In accordance with the provisions of HKFRS 3:

-

The Group ceased amortization of goodwill from January 1, 2005;

-

Accumulated amortization has been eliminated against cost as of December 31, 2004;

-

From the year ending December 31, 2005 onwards, goodwill is tested annually for impairment, as well as when there is indication of impairment. Any impairment loss will be charged to the profit and loss account directly.

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

2

Changes in accounting policies (CONTINUED)

(a)

Effect of adopting new HKFRS (continued)

The Group has reassessed the useful lives of its intangible assets in accordance with the provisions of HKAS 38. No adjustment resulted from this reassessment.

The adoption of HKAS 32 and HKAS 39 has resulted in a change in accounting policy relating to the classification of financial assets at fair value through profit or loss and available-for-sale financial assets. It has also resulted in the recognition of derivative financial instruments at fair value and the change in the recognition and measurement of hedging activities.

All changes in the accounting policies have been made in accordance with the transition provisions in the respective standards. All standards adopted by the Group require retrospective application other than:

-

HKFRS 3 and HKAS 38 - prospectively after the adoption date.

-

HKAS 39 - does not permit to recognize, derecognize and measure financial assets and liabilities in accordance with this standard on a retrospective basis. The Group applied the previous Statement of Standard Accounting Practices No. 24 ("SSAP 24") "Accounting for investments in securities" to investments in securities for the 2004 comparative information. The adjustments required for the accounting differences between SSAP 24 and HKAS 39 are determined and recognized at January 1, 2005.

(i)

The adoption of HKFRS 3 and HKAS 38 resulted in:

As of June 30, 2005

RMB'000

Increase in intangible assets

12,324

Increase in retained earnings

12,324

Six months ended

June 30, 2005

RMB'000

Decrease in general and administrative expenses

(12,324)

Increase in basic earnings per share

RMB0.001

(ii)

The adoption of HKAS 17 resulted in:

As of

As of

June 30,

December 31,

2005

2004

RMB'000

RMB'000

Increase in land use rights

15,898

16,048

Decrease in property, plant and equipment

(15,898)

(16,048)

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

2

Changes in accounting policies (CONTINUED)

(a)

Effect of adopting new HKFRS (continued)

(iii)

The adoption of HKAS 23 resulted in:

As of

As of

As of

June 30,

December 31,

January 1,

2005

2004

2004

RMB'000

RMB'000

RMB'000

Increase in property, plant and equipment

592,212

577,706

317,962

Increase in deferred tax liabilities

171,850

167,054

85,506

Increase in retained earnings

420,362

410,652

232,456

For the

year ended

Six months

December 31,

ended June 30,

2004

2005

2004

RMB'000

RMB'000

RMB'000

Decrease in finance costs

(288,192)

(33,161)

(145,720)

Increase in depreciation of property,

    plant and equipment

28,448

18,655

12,443

Increase in income tax

81,548

4,796

42,305

Increase in basic earnings per share

RMB0.02

RMB0.001

RMB0.01

(iv)

The adoption of HKAS 39 resulted in:

As of June 30, 2005

RMB'000

Increase in available for sale financial assets

10,305

Decrease in non-trading securities

(10,305)

The adoption of HKAS 31 and HKAS 39 did not have any effect on the basic earnings per share.

The adoption of HKFRS 3 and HKAS 38 did not affect the unappropriated retained earnings as at January 1, 2004.

No early adoption of the following new Standards or Interpretations that have been issued but are not yet effective. It is expected that the adoption of such Standards or Interpretations will not expect to be resulted in substantial changes to the Group's accounting policies.

HKAS 19 (Amendment)

Actuarial Gains and Losses, Group Plans and Disclosures

HKFRS 6

Exploration for and Evaluation of Mineral Resources

HKFRS-Int 3

Emission Rights

HKFRS-Int 4

Determining whether an Arrangement contains A Lease

HKFRS-Int 5

Rights to Interests Arising from Decommissioning, Restoration and Environmental Rehabilitation Funds

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

2

Changes in accounting policies (CONTINUED)

(b)

New accounting policies

The accounting policies used for the condensed interim consolidated financial statements for the six months ended June 30, 2005 are the same as those set out in 2004 annual financial statements except for the following:

2.1

Acquisition of subsidiaries and associated companies

The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the Group's fair value of the net assets of the subsidiary acquired, the difference is recognized directly in the profit and loss account.

An investment in an associate is accounted for using the equity method from the date on which it becomes an associate. On acquisition of the investment, the measurement and recognition of goodwill is same as that of goodwill arising from the acquisition of subsidiaries. Goodwill relating to an associate is included in the carrying amount of the investment. Appropriate adjustments to the investor's share of the profits or losses after acquisition are made to account based on their fair values at the date of acquisition.

2.2

Property, plant and equipment

The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.

2.3

Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group's share of the net identifiable assets of the acquired subsidiary / associate / jointly controlled entity at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill on acquisitions of associates and jointly controlled entities is included in investments in associates and jointly controlled entities. The Group ceased amortization of goodwill from January 1, 2005. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Goodwill is allocated to cash-generating units for the purpose of impairment testing.

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

2

Changes in accounting policies (CONTINUED)

(b)

New accounting policies (continued)

2.4

Foreign currency translation

(a)

Functional and presentation currency

Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates ("the functional currency"). The consolidated financial statements are presented in RMB, which is the Company's functional and presentation currency.

(b)

Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the profit and loss account, except when deferred in equity as qualifying cash flow hedges or qualifying net investment hedges.

Translation differences on non-monetary items, such as equity instruments held at fair value through profit or loss, are reported as part of the fair value gain or loss. Translation difference on non-monetary items, such as equities classified as available-for-sale financial assets, are included in the fair value reserve in equity.

(c)

Group companies

The Company's subsidiaries, jointly-controlled entities and associated companies are located in the People's Republic of China ("PRC"). Its functional and presentation currencies are in RMB.

2.5

Impairment of assets

Assets that have an indefinite useful life are not subject to amortization, which are at least tested annually for impairment or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Assets that are subject to amortization are reviewed for impairment or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units).

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

2

Changes in accounting policies (CONTINUED)

(b)

New accounting policies (continued)

2.6

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset are capitalized during the period of time that is required to complete and prepare the asset for its intended use or sale. Borrowing costs capitalized are those costs that would have been avoided if the expenditure on the qualifying asset had not been made, which are either the actual costs incurred on a specific borrowing or an amount calculated using the weighted average method, considering all the general borrowings outstanding.

Other borrowing costs are expensed as incurred.

2.7

Investments

From January 1, 2004 to December 31, 2004:

The Group classified its investments in securities, other than subsidiaries, associates and jointly controlled entities, as investment securities, trading securities, held-to-maturity securities and futures contracts.

(i)

Investment securities

These represent long-term investments in unlisted securities which are stated at cost to the Group less provision for impairment losses. The carrying amounts of individual investments are reviewed at each balance sheet date to assess whether the fair values have declined below the carrying amounts. When a decline other than temporary has occurred, the carrying amount of such securities will be reduced to the fair value. The amount of the reduction is recognized as an expense in the profit and loss account.

(ii)

Trading securities

These represent short-term investments in listed securities that the Group intends to hold for sale and are carried at fair value, which normally represents the market value. At each balance sheet date, the net unrealized gains or losses arising from the changes in fair value of the investments are recognized in the profit and loss account. Gains or losses on disposal of short-term investments, representing the difference between the net sales proceeds and the carrying amounts, are recognized in the profit and loss account as they arise.

(iii)

Held-to-maturity securities

Held-to-maturity securities are stated in the balance sheet at cost less/plus any discount/premium amortised to date. The discount or premium is amortised over the period to maturity and included as interest expense/income in the profit and loss account. Provision is made when there is a diminution in value other than temporary.

The carrying amounts of individual held-to-maturity securities or holdings of the same securities are reviewed at the balance sheet date in order to assess the credit risk and whether the carrying amounts are expected to be recovered. Provisions are made when carrying amounts are not expected to be recovered and are recognised in the profit and loss account as an expense immediately.

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

2

Changes in accounting policies (CONTINUED)

(b)

New accounting policies (continued)

2.7

Investments (continued)

(iv)

Futures contracts

The Group uses futures contracts to reduce its exposure to fluctuations in the price of primary aluminum. Payments for entering into these futures contracts are initially recognized in the balance sheet at cost and are subsequently remeasured at their fair value. Changes in fair value of futures contracts are recognized immediately in the profit and loss account.

The fair value of futures contracts is based on quoted market prices at the balance sheet date.

From January 1, 2005 onwards:

The Group classifies its investments in the following categories: financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, and available-for-sale financial assets. The classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition and re-evaluates this designation at every reporting date.

(i)

Financial assets at fair value through profit or loss

This category has two sub-categories: financial assets held for trading, and those designated at fair value through profit or loss at inception. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term or if so designated by management. Derivatives are also categorized as held for trading unless they are designated as hedges. Assets in this category are classified as current assets if they are either held for trading or are expected to be realized within 12 months of the balance sheet date.

(ii)

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the Group provides money, goods or services directly to a debtor with no intention of trading the receivable. They are included in current assets, except for maturities greater than 12 months after the balance sheet date. These are classified as non-current assets. Loans and receivables are included in trade and other receivables in the balance sheet.

(iii)

Held-to-maturity investments

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Group's management has the positive intention and ability to hold to maturity.

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

2

Changes in accounting policies (CONTINUED)

(b)

New accounting policies (continued)

2.7

Investments (continued)

(iv)

Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the balance sheet date.

Purchases and sales of investments are recognized on trade-date - the date on which the Group commits to purchase or sell the asset. Investments are initially recognized at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Investments are derecognized when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Available for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables and held-to-maturity investments are carried at amortized cost using the effective interest method. Realized and unrealized gains and losses arising from changes in the fair value of the "financial assets at fair value through profit or loss" category are included in the profit and loss account in the period in which they arise. Unrealized gains and losses arising from changes in the fair value of non-monetary securities classified as available-for-sale are recognized in equity. When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments are included in the profit and loss account as gains or losses from investment securities.

The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active (and for unlisted securities), the Group establishes fair value by using valuation techniques. These include the use of recent arm's length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, and option pricing models refined to reflect the issuer's specific circumstances.

The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of equity securities classified as available for sale, a significant or prolonged decline in the fair value of the security below its cost is considered in determining whether the securities are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognized in the profit and loss account - is removed from equity and recognized in the profit and loss account. Impairment losses recognized in the profit and loss account on equity instruments are not reversed through the profit and loss account.

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

2

Changes in accounting policies (CONTINUED)

(b)

New accounting policies (continued)

2.8

Accounts receivable and other receivables

Accounts receivable and other receivables are recognized initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of accounts receivable and other receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The amount of the provision is recognized in the profit and loss account.

2.9

Borrowings

Borrowings are recognized initially at fair value, net of transaction costs incurred. Transaction costs are incremental costs that are directly attributable to the acquisition, issue or disposal of a financial asset or financial liability, including fees and commissions paid to agents, advisers, brokers and dealers, levies by regulatory agencies and securities exchanges, and transfer taxes and duties. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized in the profit and loss account over the period of the borrowings using the effective interest method.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

2.10

Interest income

Interest income is recognized on a time-proportion basis using the effective interest method. When a receivable is impaired, the Group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired loans is recognized either as cash is collected or on a cost-recovery basis as conditions warrant.

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

3.

Critical accounting estimates and judgements

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Estimated impairment of goodwill

The Group tests annually whether goodwill has suffered any impairment in accordance with the accounting policy stated in Note 2.3. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of estimates.

Income tax

The Group is subject to income taxes in various regions within the PRC. As a result of certain matters relating to the income taxes have not been confirmed by the local tax bureau, objective estimate and judgment based on currently enacted tax laws, regulations and other related polices are required in determining the provision of income taxes to be made. Where the final tax outcome of these matters are different from the amounts originally recorded, the differences will impact the income tax and tax provisions in the period in which the differences realize.

4

Capital expenditure

Intangible assets

Property,

Mining

plant and

Land use

Goodwill

rights

Total

equipment

rights

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

Audited, net book amount

    as of January 1, 2005,

    as previously reported

406,686

322,467

729,153

33,464,575

-

Effect after adopting

    HKAS 17

-

-

-

(16,048)

16,048

Effect after adopting

    HKAS 23

-

-

-

577,706

-

Net book amount as of

    January 1, 2005,

    as restated

406,686

322,467

729,153

34,026,233

16,048

Unaudited

Additions

-

52,573

52,573

4,216,304

-

Disposals

-

-

-

(2,629)

-

Amortization/depreciation

    charge for the period

-

(21,495)

(21,495)

(1,211,537)

(150)

Impairment losses

-

-

-

(4,225)

-

Net book amount

    as of June 30, 2005

406,686

353,545

760,231

37,024,146

15,898

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

5

Acquisition of Lanzhou Aluminum

On March 28, 2005, the Group acquired 28% of the share capital of Lanzhou Aluminum Corporation Limited ("Lanzhou Aluminum"), a company with its A Shares listed on Shanghai Stock Exchange in the People's Republic of China ("PRC"). The principal activities of Lanzhou Aluminum are the manufacturing and selling of primary aluminum in the PRC.

6

Accounts receivable, net

Unaudited

Audited

As of

As of

June 30,

December 31,

2005

2004

RMB'000

RMB'000

Gross trade receivables

878,012

921,263

Less: Provision for impairment of receivables

(487,712)

(480,331)

Trade receivables, net (Note (a))

390,300

440,932

Bills receivables (Note (b))

1,752,681

1,524,195

2,142,981

1,965,127

(a)

The Group performs periodic credit evaluation on its customers and different credit policies are adopted for individual customers accordingly.

Certain of the Group's sales were on advance payment or documents against payment. In respect of sales to large or long-established customers, subject to negotiation, a credit period for up to one year may be granted.

As of June 30, 2005, the aging analysis of trade receivables, net, was as follows:

Unaudited

Audited