The investment comes from Chalco Hong Kong, a wholly-owned subsidiary of Chalco, and follows moves by Bosai Minerals (the global trading name of the Chinese Nanchuan Minerals Group) to invest in a $1 billion alumina project in Indonesia.

The Chalco deal is with PT Indonusa Dwitama, a mining company.

Such an investment makes sense when you consider that Indonesia has supplied 80% of China's 27Mt of bauxite up until May 2012 when the 20% tax was introduced and bauxite shipments were cut.

After the announcement of the tax, both Chalco and Bosai Minerals reduced imports of Indonesian bauxite, but through investments on the ground, China hopes to alleviate supply problems associated with the tax, which comes into full force in 2014.

Bauxite exports from Indonesia to China increased 13.4% in July and this is thought to be because China is hedging its bets and keeping a supply stream open until its Indonesian alumina projects go live.

Chalco is the world's second largest alumina producer and China is the world's largest producer and consumer of refined aluminium.