Daye Nonferrous Metals Company, China's fifth-biggest copper producer, is likely to expand copper mine resources after a 1 billion yuan ($145.92 million) cash investment from Yangtze Power Co Ltd.

Yangtze's move has also ended Aluminum Corp of China's (Chalco) four-year ambition to take control of Daye's copper production, a further setback for the country's top aluminium group's plans to expand into non-ferrous metals after it failed to take over Shaanxi Nonferrous Metals.

An official at the propaganda department of the State-owned Assets Supervision and Administration Commission in Hubei province said the Hubei government aimed to consolidate copper resources in the province and would select Daye to develop them.

"After the investment, Daye is likely to lead the development of copper mine resources in the province," the official told Reuters on Wednesday.

Yangtze Power had agreed to buy a minority stake from the Hubei government in Daye's copper production subsidiary for 1 billion yuan in cash, a statement on Daye's website said (www.dyys.com). Daye wanted to use the cash to expand resources.

Daye has annual refined copper capacity of 400,000 tonnes, 10 tonnes of gold, 300 tonnes of silver and 160,000 tonnes of semi-finished copper products, according to the website.

The Hubei government and state-owned Chinalco, parent of Chalco, signed an agreement in 2004 to transfer a majority stake in Daye to Chinalco which in return agreed to take a 49 percent stake and finance Daye's copper products plant.

But copper prices MCU3 have nearly tripled since then to a record $8,940 a tonne on Wednesday, raising the value of Daye's assets.

"The agreement with Chinalco was a framework agreement. We did not execute it," the official said, without providing the reason.

But the official said Yangtze's buyout would not affect Chinalco's stake in Daye's products plant and another agreement with Hong Kong's EPI (Holdings) Ltd (0689.HK: Quote, Profile, Research) for which Daye would form a joint venture with EPI by selling three mines and a majority stake in another mine in China.

SHAANXI BID ALSO FAILS

A Chinalco source accepted that the company had lost out on its bid for Daye.

He also confirmed that Chinalco had also failed to take over Shaanxi Nonferrous, the parent of Jinduicheng Molybdenum which is China's second-biggest miner of the steel alloying metal.

In 2003, the Shaanxi government transferred part ownership of its Shaanxi Nonferrous to Chinalco which in return promised to invest more than 10 billion yuan in the province.

The Chinalco source said those assets had been returned to the Shaanxi government.

Chinalco last year bought Yunnan Copper, China's third-biggest copper producer. ($1=6.8530 yuan)