....in West Africa (read below). It is
possible BCL will do a similar deal with Chinalco which should be good for
all concerned.[see below]
Thanks and regards,
Chinalco and Rio enjoy iron grip
Michael Sainsbury, China correspondent From: The Australian July 30, 2010
12:00AM CHINA has hailed the $5.5 billion west African iron-ore venture
between its state-run Chinalco and Rio Tinto as a "powerful union".
The companies are planning to begin mining the massive Simandou iron-ore
deposit in Guinea, which Rio believes is the world's "single-best"
undeveloped deposit of iron ore, by 2016.
"We expect the two sides will regard co-operation on the Simandou project
to be the foundation for further pushing forward the co-operation of these
two companies in other resource projects," Chinalco president Xiong
Weiping said.
While The Australian understands no other deals between the companies are
imminent, industry observers believe that the next potential tie-up
between the two could be on the giant Mongolian copper and gold resource
Oyu Tolgoi, which is owned by Rio and Canada's Ivanhoe Mines.
"Last year, China became the largest destination for our products," Rio
chairman Jan du Plessis said at the signing ceremony in Beijing's Great
Hall of the People.
"Our links with China will continue to deepen and flourish for decades to
come."
Chinalco's Hong Kong-listed subsidiary Chalco will acquire a 47 per cent
interest in the new joint venture for $US1.35 billion on an "earn-in
basis" through sole funding of ongoing development work over the next two
to three years. But the project will need significant but unspecified
extra funding. Rio indicated in a 2007 study it would need to spend at
least $US6 billion but analysts believe the figure has increased.
The Guinean government holds an option to buy up to 20 per cent of the
project, an option it has recently expressed a willingness to exercise.
Once the group has paid its $US1.35 billion, the effective interests of
Rio Tinto and Chalco in the Simandou project will be 50.35 and 44.65 per
cent respectively. The remaining 5 per cent will be owned by the
International Finance Corporation (IFC), the financing arm of the World
Bank.
The deal also represents a long-awaited rapprochement between Rio and the
Chinese company, which effectively rescued it from being taken over by BHP
Billiton, only to see its $US19.5 billion offer to double its stake in the
London-based miner rejected by shareholders last year.
Simandou has a resource of 2.25 billion tonnes of iron ore and once fully
operational, the mine is expected to produce more than 70m tonnes of iron
ore per annum.
"It's a milestone event in the history of co-operation between Chinese and
foreign companies," Umetal.com analyst Hu Kai said.
The venture will see China become a significant player in the trade of
seaborne iron ore -- which is dominated by Rio, BHP Billiton and Brazil's
Vale -- for the first time.
"But the co-operation doesn't mean Chinese mills will enjoy a better price
in future ore-price negotiation," Mr Hu said.