China and Rio Tinto complete Guinea mining deal

Chinalco will invest $1.35bn in the Simandou project

Mining giant Rio Tinto has completed a deal with Chinese firm Chalco to enter a joint venture in West Africa.

The agreement follows a memorandum of understanding between Rio and Chalco's parent company Chinalco in March.

The venture will develop Rio's Simandou iron ore project in Guinea.

Rio's ties with Beijing became strained when four of its workers in China were arrested last year, suspected of commercial espionage and taking bribes. They were convicted in March 2010.

And in June last year, Rio disappointed the Chinese firm by pulling out of a proposed joint venture in favour of a tie-up with rival BHP Billiton.

'Important deal'

"Developing our relationship and business links with China is a key priority for Rio Tinto. This agreement takes our relationship with China and our largest shareholder Chinalco to a new level," said Rio chairman Jan du Plessis.

James Bevan at CCLA Investment Management agreed. He told the BBC: "This is a really important deal for Rio. It will heal some of the damage in its relationship with China."

Chinalco, which has a 9% stake in Rio, will invest $1.35bn (£860m) in the Simandou project.

Chinalco president Xiong Weiping said: "This project can also efficiently balance China's need for security on the global iron ore market.

"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 the two companies in other resource projects."

He said he hoped it would help Guinea, too.

"We believe the successful development of the Simandou project will greatly quicken the pace of local infrastructure construction and economic development," Mr Xiong Weiping said.