Chinalco, RioTinto in $12-billion Simandou iron ore project talks

Having failed in Australia, Rio Tinto and Chinalco plan to make up in Africa through a $12-billion joint venture to develop the Simandou iron ore project in Guinea.

The world' second largest miner, Rio Tinto and China's state-owned Aluminium Corporation of China (Chinalco) are considering a business venture after the Chinese industrial giant's $19.5-billion investment plan in Rio Tinto was torpedoed by the shareholders of the Anglo Australian miner last year, forcing the company to go in for a $15.2-billion rights issue to solve its debt problems. (See: Rio terminates Chinalco deal; to raise $15.2 billion through rights issue)

According to reports, both companies are in the final stage of negotiations to develop Rio Tinto's Simandou mining concession in the West African state of Guniea at a developmental cost of $12 billion.

The deal is reported to be structured in such a way that Chinalco would invest the money to develop the project in exchange for a minority stake in it, with Rio Tinto as the major partner.

Rio Tinto, which holds mining concession for 738-square km in Simandou in Guinea, had shelved plans to develop the project last year in the wake of the slump in commodity prices and aggressive cost cutting to reduce its $42-billion debt by $10 billion by the end of 2009. (See: Major shake up at Rio Tinto to reduce debt) 

Rio Tinto chief executive Tom Albanese had said in December 2008 that the Simandou project was "without doubt, the top undeveloped tier-one iron ore asset in the world" and had estimated the development cost at approximately $6 billion, which analysts now say is likely to be almost double that amount.