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Beijing (AFP) July 29, 2010 Mining giant Rio Tinto and China's Chalco on Thursday signed a binding agreement to jointly develop a huge African iron ore field, with the Chinese company to invest 1.35 billion dollars in the project. Chalco, a listed subsidiary of state-owned Chinalco, will acquire a 44.65 percent interest in the Simandou project in Guinea and Rio will take 50.35 percent, the Anglo-Australian miner said in a statement on its website. The remaining five percent will be held by the International Finance Corporation, the financing arm of the World Bank. "We believe the successful development of the Simandou project will greatly quicken the pace of local infrastructure construction and economic development," Xiong Weiping, president of Chinalco, said in the statement. "This project can also efficiently balance China's need for security of supply on the global iron ore market." The Guinean government has the option to buy up to 20 percent of the project, where operations are expected to start within five years. The binding agreement cements a memorandum of understanding signed between Rio Tinto and Chinalco in March. Once fully operational, Simandou is expected to produce more than 70 million tonnes of high-grade iron ore annually. Satisfying demand in the Chinese market will be a high priority, the statement said. Analysts have said the "world class" mine contains an estimated 2.5 billion tonnes of high quality iron ore and could produce 200 million tonnes a year, matching Rio's entire Western Australian Pilbara operation. Rio Tinto chairman Jan du Plessis said: "Developing our relationship and business links with China is a key priority". "This agreement takes our relationship with China and our largest shareholder Chinalco to a new level," he said in the statement. Ties between Rio and China soured after it snubbed a massive Chinalco cash injection in June last year, and four of its employees were tried and convicted in the country for alleged bribery and industrial espionage during iron ore contract negotiations.
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