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Chinalco-Rio Tinto joint deal for iron ore
By Pan Xiaoyi |
March 19, 2010, Friday
|
Online Edition
Online Edition
ALUMINUM Corp of China, known as Chinalco, has agreed with Rio Tinto Group to pay US$1.35 billion for part of its stake in the Simandou iron ore mine in Guinea.
It is their first tie-up after Rio scrapped Chinalco's US$19.5 billion offer for a company stake last year and is seen as a sign of an improvement in the relationship between the two companies.
The two parties have signed a non-binding memorandum of understanding to set up a joint venture, which holds 95 percent of the Simandou project, previously owned by Rio Tinto. Under the deal, Chinalco will take a 47 percent interest in the joint venture by funding the ongoing development work over the next two to three years while Rio Tinto takes the balance, Chinalco and Rio Tinto said in separate statements today.
The deal will give Chinalco a 44.65 percent effective interest in the project while Rio Tinto has 50.35 percent.
"It makes sense that Anglo-Australian miner Rio values the cooperation with Chinese partners as China is the world's largest iron ore importer," said Fan Guohe, an analyst at Philip Securities Research.
"The partnership will be in the interests of both sides. And Rio has an eye on Chinalco's capital strength," added Fan.
Tom Albanese, chief executive of Rio Tinto, said: "We have long believed that Rio Tinto and Chinalco could work together on major projects for mutual benefit."
The Simandou project is believed to be a large scale, long life asset and is the single best undeveloped source of high grade iron ore, according to the statements.
The project has an estimated 2.25 billion metric tons of resources with the ultimate reserves mounting 5 billion metric tons. It can produce 70 million metric tons annually in the initial phase on completion. The iron ore will be shipped to China through a sales company set by the two companies, Chinalco said in a statement.
It is their first tie-up after Rio scrapped Chinalco's US$19.5 billion offer for a company stake last year and is seen as a sign of an improvement in the relationship between the two companies.
The two parties have signed a non-binding memorandum of understanding to set up a joint venture, which holds 95 percent of the Simandou project, previously owned by Rio Tinto. Under the deal, Chinalco will take a 47 percent interest in the joint venture by funding the ongoing development work over the next two to three years while Rio Tinto takes the balance, Chinalco and Rio Tinto said in separate statements today.
The deal will give Chinalco a 44.65 percent effective interest in the project while Rio Tinto has 50.35 percent.
"It makes sense that Anglo-Australian miner Rio values the cooperation with Chinese partners as China is the world's largest iron ore importer," said Fan Guohe, an analyst at Philip Securities Research.
"The partnership will be in the interests of both sides. And Rio has an eye on Chinalco's capital strength," added Fan.
Tom Albanese, chief executive of Rio Tinto, said: "We have long believed that Rio Tinto and Chinalco could work together on major projects for mutual benefit."
The Simandou project is believed to be a large scale, long life asset and is the single best undeveloped source of high grade iron ore, according to the statements.
The project has an estimated 2.25 billion metric tons of resources with the ultimate reserves mounting 5 billion metric tons. It can produce 70 million metric tons annually in the initial phase on completion. The iron ore will be shipped to China through a sales company set by the two companies, Chinalco said in a statement.
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