Chalco, Rio Tinto To Set Up Joint Venture Company For Simandou Mine

29th Jul 2010 09:12

BEIJING (Dow Jones)--Aluminum Corp. of China Ltd. (ACH) or Chalco, the listed unit of Aluminum Corp. of China, or Chinalco, will form a new joint venture with Anglo-Australian miner Rio Tinto PLC (RTP) to develop and operate the Simandou iron ore mine in Guinea, the two companies said Thursday. Chalco's partners in the project will be China Railway Construction Corp. and China Communications Construction Corp., the companies said in a joint statement issued at a signing ceremony. Chalco, which will invest $1.35 billion in the project over two-three years, will eventually own 47% of the mine, up from an initial 44.65%. Rio Tinto will hold 50.35% and the remaining 5% will be held by the International Finance Corp. The Guinea government has an option to buy up to 20% of the mine, the companies said, adding that the joint venture suits Guinean government requirements and China's bilateral needs. The mine, expected to be operational in five years, will have a capacity to produce 70 million tons of iron ore annually. Pending the announcement, trading in Chalco shares was halted on the Shanghai and Hong Kong stock exchanges Wednesday. The company said trading will likely resume Friday. Chalco's yuan-denominated A-shares rose by nearly 14% in the past seven sessions--before trading was suspended. The move comes after China's State-owned Assets Supervision and Administration Commission of the State Council last week approved a change in Chinalco's statement of core businesses. The company has officially added iron ore to its brief, as part of a wider core business that named mined resources, nonferrous metals and mineral resources excluding petroleum and natural gas. Sasac's previous statement, in 2007, showed Chinalco's core businesses were aluminum, copper and rare earths. Announcing the deal Thursday at the Great Hall of the People, Rio Tinto Chairman Jan du Plessis said it was a priority for his company to repair strained relations with Chinalco, China's biggest aluminum maker by volume and the biggest shareholder in Rio Tinto. Relations between the two deteriorated after Rio Tinto rejected a takeover bid by Chinalco, opting instead to team up with BHP Billiton Ltd.(BHP) to form a separate iron-ore joint venture in Australia. The arrest and conviction of four Rio Tinto employees in China on commercial espionage charges also affected relations between the two countries. -By Chuin-Wei Yap, Dow Jones Newswires; 8610 6588 5848; [email protected] (END) Dow Jones Newswires July 29, 2010 04:12 ET (08:12 GMT)