MIXING METALS : An alumina processing workshop of Chalco. Aside from its routine alumina production, Chalco is investing heavily in iron ore mining and development around the world (XINHUA)

China's biggest aluminum producer Aluminum Corp. China Ltd. (Chalco) signed a binding agreement with the world's second largest mining company, Rio Tinto, on July 29 in Beijing. The agreement will establish a joint venture to develop and operate the Simandou iron ore project in Guinea, Africa.

The Simandou project is expected to yield at least 70 million tons of high quality iron ore annually. The resources will be reserved primarily for the Chinese market.

Under the terms of the agreement, Rio Tinto's 95-percent stake in the Simandou project will be held in the new JV. Chalco will acquire a 47-percent stake in the new JV by providing $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 $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 5 percent will be held by the International Finance Corp. (IFC), the financing arm of the World Bank, according to Rio Tinto's website.

"Simandou will be the largest integrated iron ore mine and infrastructure project ever developed in Africa," said Rio Tinto's iron ore chief executive Sam Walsh.

Xiong Weiping, Chairman and CEO of Chalco, and President of Chinalco, Chalco's parent company, said the "establishment of a joint venture will make use of Chinalco's advantages in the infrastructure field and its profound understanding of the Chinese market, as well as Rio Tinto's technologies and experience in the operation of large mining projects, to form a complementary and powerful union."