Rio Tinto and Chinalco team up on Simandou

Finance

Publishing Date: 19 Mar 2010 1:07pm GMT
Author: Mining Journal

Aluminium Corp of China (Chinalco) will inject US$1.35 billion into Rio Tinto’s Simandou Iron Ore project in Guinea.

By funding the next two to three years of development work, Chinalco will earn an effective 44.65% interest in the project, with Rio retaining 50.35% and the International Finance Corporation (IFC) 5%.

“Chinalco is an excellent partner for us at Simandou,” said Rio Tinto, chief executive, Tom Albanese, adding: “Chinalco brings its own skills and capabilities in major projects and access to the infrastructure expertise of other Chinese organisations.”
Rio has already spent US$600 million on the project, which currently employs over 1,000 people.

At full production, Simandou is expected to produce over 70Mt/year of iron ore. Historically a resource estimate of 2,100Mt @ 66% Fe was released, covering a portion of the asset.

Analysts at Ambrian Capital said the deal was positive for Rio Tinto. “This is a great deal for Rio Tinto and Tom Albanese, well timed in terms of ongoing iron ore price negotiations and further underpins our view Rio is the best large cap diversified on the LSE to gain exposure to the iron ore and copper markets.”