Rio Tinto and Chinalco to form JV to develop Guinean iron ore deposit

Friday, 19 March 2010 13:44:17 (GMT+2)

Australian mining giant Rio Tinto and Chinese top industrial group Chinalco have signed a non-binding memorandum of understanding (MoU) to establish a joint venture covering the development and operation of the Simandou iron ore project in Guinea, West Africa. The scope of the proposed joint venture covers rail and port infrastructure as well as the mine itself. 

According to a Rio Tinto press release issued on March 18, the Australian miner currently owns 95 percent of the Simandou project with the remaining five percent being owned by the International Finance Corporation (IFC), the financing arm of the World Bank.

Under the MoU, Rio Tinto's interest in the Simandou project will be held in a new joint venture. Chinalco will acquire a 47 percent interest in the new joint venture by providing US$1.35 billion for funding of ongoing development work over the next two to three years.

Following the formation of the joint venture, Rio Tinto's Simfer subsidiary will continue to manage the development of the project.

The Guinean government holds an option to buy up to 20 percent of the project. Any interest acquired by the Guinean government would proportionally reduce the effective interests of Rio Tinto, Chinalco and the IFC in Simandou.

Rio Tinto and Chinalco will now work on finalizing definitive and binding transaction documentation.

As SteelOrbis previously reported, Chinalco and Rio Tinto recently engaged in negotiations about the development of the Oyu Tolgoi copper ore project in Mongolia and the Simandou iron ore Project in Guinea. The Simandou iron ore mine is the largest maiden iron ore deposit in the world, with iron ore reserves totaling 2.25 billion mt, of which over half are of 65 percent iron content.

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