Chalco, Rio Tinto to co-develop world-class iron ore mine in Guinea

The Aluminum Corporation of China, Ltd. (Chalco) signed an agreement with the Anglo-Australian mining giant Rio Tinto on July 29 to jointly carry out an iron ore project in Guinea, a country in western Africa, today's Shanghai Securities News reported.

Rio Tinto and Chalco's parent Chinalco signed a non-binding memorandum of understanding in March to co-develop a world-class iron ore mine owned by Rio Tinto in Guinea's Simandou region.

Under the agreement, a joint venture will be set up to hold a 95 percent stake in the Simandou project, and Chinalco will acquire 47 percent of the venture by investing nearly 1.4 billion U.S. dollars over the next two to three years, with Rio Tinto taking the remaining 53 percent stake. In addition, the two companies will create another joint venture to sell iron ore products in China.

The Simandou project is to develop a gargantuan open-pit hematite mine, which has an estimated proven reserve of 2.3 billion tons and total reserves of about 5 billion tons. Furthermore, the grade of iron ore will range from 66 percent to 67 percent.

Insiders predicted that the project will produce at least 70 million tons of iron ore per year after the completion of the first phase. Analysts from various research institutions all agreed that this cooperation is great news for Chalco and will boost its business.

Chalco experienced declines in revenue over the past two years and posted a 4.6 billion yuan net loss in 2009. As a result of falling aluminum and alumina prices, as well as the end of the preferential electricity prices, the company’s profits will likely continue to drop in the second half of 2010.

"The signing means that Chalco has begun a strategic transformation and plans to enter the non-ferrous and ferrous metals market. Given that the golden period for Chalco's main business has finished, this significant attempt may help the company find a new source of profits," said Heng Kun, chief analyst at Essence Securities.

By People's Daily Online