Rio Tinto, Chinalco mending fences

Mining giant Rio Tinto has struck a deal with its partner and largest shareholder, the Aluminum Corp of China, or Chinalco. The two sides signed a 2.9-billion-US-dollar agreement to develop an iron ore reserve in the West African country of Guinea. The joint venture covers rail and port infrastructure as well as the Simandou mine itself.

The joint venture, not binding at this stage, marks a turnaround from last year, when Rio Tinto scrapped a 19.5-billion-US-dollar agreement with Chinalco.

Under this deal, Rio will put its current 95 percent holding in the Simandou project into the new joint venture. Chinalco will invest 1.35 billion US dollars for a 47 percent stake in the venture to fund ongoing development during the next two to three years.

At the end of that period, Rio will own 50.35 percent and Chinalco 44.65. The Guinean government has an option to buy up to 20 percent of the project.

Rio says Simandou is the world's biggest undeveloped iron ore deposit, with 2.25 billion tonnes of ore.

Chinalco expects the iron ore venture will have an annual capacity of 70 million tons during the first phase of production.

The state-owned company also says in a separate statement Rio will operate the venture but both sides will have an equal number of directors, with ore being sold to China.

The announcement of the deal helped drive up share prices of Chinalco.