Miner Rio Tinto and Chinese-run aluminium firm Chinalco have signed a memorandum of understanding (MoU) to establish a joint venture covering the development and operation of the Simandou iron ore project in Guinea.

The deal is the latest sign that the two companies have patched up the differences caused by last year's collapse of their planned tie-up.

Rio currently owns 95% of the Simandou project with the remaining 5% being owned by the International Finance Corporation (IFC), the financing arm of the World Bank.

Under today's agreement, Rio's interest in the Simandou project will be held in a new joint venture. Chinalco will acquire a 47% interest in the new joint venture by providing $1.35bn on an earn-in basis through sole funding of ongoing development work over the next two to three years.

Once Chinalco has paid its $1.35bn, the Rio Tinto and Chinalco effective interests in the Simandou project will be 50.35% and 44.65% respectively.

The scope of the proposed joint venture covers rail and port infrastructure as well as the mine itself.

Chief executive Tom Albanese said "We have long believed that Rio Tinto and Chinalco could work together on major projects for mutual benefit. Chinalco brings its own skills and capabilities in major projects and access to the infrastructure expertise of other Chinese organisations."

"We believe the Simandou project is a large scale, long life asset and is the single best undeveloped source of high grade iron ore. By working with Chinalco and the IFC we expect to realise great economic and social benefits for Guinea, and great value for our shareholders," he added.

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