Top Biz News

Chinalco, Rio sign up to Guinea venture

By Zhang Qi (China Daily)
Updated: 2010-03-20 09:35

Project to tap into world's biggest undeveloped iron ore deposit

BEIJING: Aluminum Corp of China (Chinalco), the nation's largest aluminum producer, agreed to set up a joint venture with Anglo-Australian miner Rio Tinto to develop the Simandou iron ore project in West African nation of Guinea.

Chinalco, the top shareholder in Rio with a 9.3 percent stake in the mining group, signed a non-binding accord to pay $1.35 billion for a 44.65 percent stake in the project, according to a statement issued by Chinalco on Friday.

Rio will put its current 95 percent holding in Simandou into the new joint venture, Rio said in a separate statement on Friday.

The financing arm of the World Bank holds the remaining 5 percent stake in Simandou.

"Chinalco and Rio are commercial partners, and there is no resentment between the two sides," said Chinalco Vice-President Lu Youqing. "As long as any commercial project is mutually beneficial, we would like to be involved."

Xiong Weiping, president of Chinalco, said that both sides will accelerate the development of the project, and realize the investment value soon.

"We have long believed that Rio Tinto and Chinalco could work together on major projects for mutual benefit," Rio Chief Executive Tom Albanese said.

The project comes as Rio is trying to repair its relations with China, its biggest customer. It ended talks with Chinalco on a $19.5 billion investment in June 2009, and relations grew more strained when four of Rio's Shanghai-based employees were accused of bribery and commercial espionage.

Rio said Simandou is the world's biggest undeveloped iron ore deposit, with 2.25 billion tons of ore. Rio has invested $600 million to process and develop the mine, and it is expected to produce 70 million tons of ore in 2013.

Chinalco said the company will nominate three directors for the iron ore venture, the same number as Rio. Chinalco may get Chinese partners in the railway, port, steel and financial sectors to jointly develop and construct the project if necessary, Chinalco's statement said.

The two companies will also establish a distribution joint venture to sell iron ore on the Chinese market.

"It is a good deal for Chinalco with an estimated annual return of $1 billion for the iron ore project, and it will help to expand the company's non-aluminum sectors," Guotai Junan Securities analysts wrote in a note on Friday.