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Anglo-Australian mining giant Rio Tinto and Chinese resources giant Chinalco's subsidiary Chalco on July 29 signed a binding agreement to establish a joint venture (JV) covering the development and operation of the Simandou iron ore project in Guinea.
 
The binding agreement follows the signing of a memorandum of understanding between Rio Tinto and Chalco's parent Chinalco announced on March 19, 2010.  The agreement covers all aspects of how the JV and project itself will operate and be governed, including planning, construction and management of the mine and associated rail and port infrastructure.
 
According to a Rio Tinto statement, under the terms of the agreement Rio Tinto's 95 percent interest in the Simandou project will be held in the new JV. Chalco will acquire a 47 percent interest in the new JV by providing US$1.35 billion on an earn-in basis through sole funding of ongoing development work over the next two to three years. Once Chalco has paid its US$1.35 billion, the effective interests of Rio Tinto and Chalco in the Simandou project will be 50.35 percent and 44.65 percent respectively. The remaining five percent will be owned by the International Finance Corporation (IFC), the financing arm of the World Bank.
 
The formation of the JV will be finalized in consultation with the Guinean government and following satisfaction of various regulatory requirements.
 
Commenting on the binding agreement, Jan du Plessis, chairman of Rio Tinto, said, "This agreement takes our relationship with China and our largest shareholder Chinalco to a new level, building on a line of successful partnerships between Rio Tinto and China."