03/12/2010 - 13:13

Rio strengthens China ties

03/12/2010 - 13:13

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Rio Tinto has bolstered its links with China, with the announcements today of an extension of its Pilbara joint venture with SinoSteel and an Asia-based minerals exploration joint venture with Chinalco.

Rio strengthens China ties

Rio Tinto has bolstered its links with China, with announcements today of an extension of its Pilbara joint venture with Sino Steel and an Asian-based minerals exploration joint venture with state-owned Chinalco.

Rio's agreement with Sinosteel allows for an extra 50 million tonners of iron ore to be produced at their Channar Mining joint venture, located 60 kilometres south of Tom Price in the Pilbara.

The original Channar agreements, signed in 1987, were for the production of 200 million tonnes of ore.

Rio Tinto iron ore boss Sam Walsh said in a statement to the ASX that the deal was the latest milestone in Rio's long history of close ties with China, now its single largest market.

"Rio Tinto first sent a shipment of iron ore from the Pilbara to China in 1973, and the proven strength of a mutually rewarding partnership built on those early days has stood the test of time, as now reflected in this extension of the Channar agreement," Mr Walsh said.

In Rio's other China announcement, Rio Tinto and state-owned Aluminum Corporation of China (Chinalco) have agreed to establish a joint venture in China to explore for mineral deposits in the Asian nation.

The joint venture will explore mainland China for mineral deposits, with between three and five large-area exploration projects expected for initial focus.

Chinalco will hold a 51 per cent stake in the joint venture, which will be established next year, and Rio a 49 per cent stake.

The two companies announced the signing of a non-binding memorandum of understanding on the joint venture on Friday.

Rio Tinto will appoint the chief executive of the exploration joint venture, with the chairman of a five member board to be nominated by Chinalco.

Chinalco's expertise and understanding of the Chinese environment would complement Rio Tinto's application of world leading mining technologies and experience, Rio Tinto said.

"This exploration JV is the latest chapter in the rich history of partnerships between Rio Tinto and China," chief executive Tom Albanese said in a statement.

"The combination of skills provided by Rio Tinto and Chinalco offers great potential to unlock value for mutual benefit."

Relations between the two companies were strained during 2009 after Rio Tinto walked away from a proposed $US19.5 billion ($A21.3 billion) investment by Chinalco, and failed to agree on a benchmark iron ore price with the Asian nation's steel mills.

But those issues are now in the past, with Friday's announcement coming months after Rio Tinto and Chinalco announced plans to jointly develop the Simandou iron ore project in Guinea.

Rio Tinto shares were up $1.48, or 1.73 per cent, at $86.48 at 1518 AEDT.

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