March 19th, 2010 | Caixin Chinalco, Rio Tinto Ink Africa Deal
Rio Tinto and Chinalco sign an iron ore joint venture deal for a 95 percent stake in the Simandou project located in west Africa’s Guinea
Aluminum Corp. of China (Chinalco) and Australian mining giant Rio Tinto agreed to set up an iron ore joint venture in West Africa’s Guinea to export iron ore to China, after the two companies’ proposed US$ 19.5 billion tie-up collapsed.
According to company statements, the two companies signed a non-binding accord to form a joint venture which will hold 95 percent stake in the Simandou project in Guinea. Chinalco will invest US$ 1.35 billion to get a 47 percent stake in the venture, while Rio Tinto will hold the remainder.
According to the details of the agreement, Chinalco and Rio Tinto will each nominate three directors for the iron ore venture. Rio Tinto will be in charge of project operations, while Chinalco will be involved in managing the venture as well.
Rio Tinto stated that the Simandou project has a proven reserve of 2.25 billion tons. The total deposit may reach 5 billion tons. The first phase of production for the project is expected to yield 70 million tons per year.
The deal is seen as a step for Rio Tinto to repair its relations with Chinalco, the company’s largest single shareholder. Last year, Rio Tinto scrapped a $19.5 billion investment by Chinalco.
“The agreement shows that the relationship between Chinalco and Rio Tinto is returning to normal,” said a source close to the deal, adding that it is especially important for Rio Tinto to make efforts to rebuild its relations with China.
At the same time, the trials of the four Rio Tinto staff charged for commercial crimes are scheduled to begin next Monday in Shanghai. The four, including Australian national Stern Hu, head of Rio Tinto’s China operations, and three Chinese nationals, were detained last July on accusation of the theft of commercial secrets and bribery.
By staff reporter Yan Jiangning