Watch VideoPlay Video
The Aluminum Corporation of China, or Chinalco, has formalized a joint venture with Rio Tinto to develop iron ore in Africa. It brings the listed state-run arm "Chalco", into the project as it moves to diversify beyond its core aluminum business.
Under the agreement, Rio Tinto's subsidiary company will continue to take charge of the exploitation of the Simandou joint venture in Guinea.
While Chinalco will send its staff to join in the management team at the new joint venture.
|The Aluminum Corporation of China, or Chinalco, has |
formalized a joint venture with Rio Tinto to develop
iron ore in Africa.
Chinalco is planning to inject 1.3 billion US dollars within the two to three years, into the joint venture. It expects to eventually have a 47 percent in the company.
The joint venture is expected to begin production within five years. Experts explain what difficulties face African iron ore miners.
Sheng Zhicheng, Vice Secretary General of Steel Logistics Committee, CFLP said "The local fundamental construction lags far behind. So by launching the joint venture, we will also introduce railway and port construction. We will also set up steel making companies. It means that we have to make local transportation and down stream industry available as well."
Since the iron ore mine was discovered in 1996, Rio Tinto has paid huge expenses to exploit it. The Australian steel giant said in 2008 that it had to invest over 20 million US dollars every year to exploit the mine.
Experts say that by cooperating with China, Rio Tinto can take better advantage.
Sheng Zhicheng said "Of course Rio Tinto has to consider its investment environment. That's why it wants to cooperate with China. The long-formed partnership between China and Africa is treasured by Rio Tinto."
Analysts also said the move was designed to help Chinalco diversify its business beyond the volatile aluminum market, which has seen wide swings over the last year.
- Chinalco, Rio Tinto get closer 2010-07-30