Rio Tinto and Chinalco on Friday confirmed plans to form a partnership that will develop an iron ore deposit in Guinea, expected to be the first of several joint ventures between the Anglo-Australian miner and its biggest shareholder.
The Chinese state-owned aluminium producer said it would invest $1.4bn in the early stages of the Simandou project in return for a 47 per cent stake in a new company alongside Rio with 53 per cent.
The partnership will cover mining as well as rail and port infrastructure in a project that analysts believe could cost $12bn to develop.
News of the joint venture comes at a delicate time for Rio and China. Stern Hu, Rio’s executive iron ore salesman in China, and three associates are due in court in Shanghai on Monday to face charges that they stole commercial secrets and took bribes.
Canberra on Friday expressed its disappointment that requests for Australian access to all trials had been turned down by Beijing.
China’s treatment of the Rio employees will be watched closely by the international business community. The trial coincides with the arrival in China of Tom Albanese, Rio chief executive, who is due to speak at the China Development Forum in Beijing on Monday.
The relationship between the two companies soured nine months ago when Rio spurned a $19.5bn injection from Chinalco before launching a $15.2bn rights issue and agreeing a joint venture with BHP Billiton to develop its Western Australian iron ore operations.
But Rio’s top management has made references to extending ties with Chinalco, which holds a 9 per cent stake in the group.
Xiong Weiping, Chinalco president, said on Friday that Simandou was a world-class iron ore project and its development would enhance economic and trade relations between China and Guinea.
“A successful development of the Simandou project will effectively increase the global supply of iron ore, balance the global iron ore market structure and promote the long-term, stable and healthy development of the global iron ore mining industry,” he said.
In a client note, Citigroup said the Simandou deal signified a thaw in relations between Rio and Chinalco.
“Other logical deals to do include the development of Arakun as an extension of the Weipa bauxite mine [in Queensland, Australia] and potentially around the Oyu Tolgoi development in Mongolia.”
People close to the Mongolian mining industry have said they believed Rio and Chinalco were working out a deal on Oyu Tolgoi, a copper-gold deposit that is a joint venture between Rio and Ivanhoe Mines of Canada.
Blackstone and China International Capital Corporation advised Chinalco on the transaction.
