Once established, the JV will operate under the auspices of Chinalco Rio Tinto Exploration Co and will be 51% owned by Chinalco, with Rio holding the balance, and has already received the tick approval from China’s Ministry of Land and Resources.
Represented at the JV vehicle table will be three Chinalco directors, including the chairman plus the chief financial officer, deputy general manager and compliance supervisor, while Rio will appoint two directors and a general manager, who will be responsible for day to day operations.
At a signing ceremony in Beijing yesterday, attended by Chinalco president Xiong Weiping and Rio chief executive officer Tom Albanese, both executives made clear their plans for the JV, which was first formalised in December last year via a non-binding memorandum of understanding.
The Rio chief said the immediate priority would be copper exploration across mainland China, with coal and potash the next in line, although at a later date.
The approval of the Chinese ministry is seen by many as a big step forward for Rio in the country, as it offers the opportunity for the company to enter prospective ground held by the Ministry of Land and Resources.
“The formalisation of our exploration JV is an important milestone in the expanding relationship between Rio and China,” he said.
It also represents a further move into the global copper arena for Rio, which signed two deals with another Chinalco affiliate, China Yunnan Copper, in April on potential JV opportunities for the metal in Chile.
Here it already has a 30% stake in the world’s largest copper mine at Escondida where reports emerged last month by BHP Billiton, its 57.5% owner, that production at the site continues to fall.
Minera Escondida, a subsidiary of BHP, said output at the mine dropped to 235,270 tonnes in the latest three month period, from 245,151t in the corresponding March quarter last year.
Annual volumes at Escondida dropped by 1.4% last calendar year to a rate of 1.07 million tonnes per annum, versus 1.09Mtpa in 2009.
However, earlier this year BHP announced it had approved a $US554 million ($A522 million) investment at the operation in a bid to tap into higher grade ore and subsequently lift production by 2013.
The major’s 2010 annual report shows a drop in copper volumes.
Last year Rio produced 393,000t of refined copper for its share of operations globally compared to 412,000t in 2009 and mined 678,000t versus 805,000t in 2009, while reserves have grown to 16.68 million tonnes compared to 15.72Mt in 2009.
However, winding back the clock to 2006 and Rio’s copper reserves stood at 17.99Mt, yet its share of refined production was 299,000t, of which mined volumes were 803,000t.
Another of its prized copper assets to take a hit in the March quarter was the mighty Grasberg operation in Papua New Guinea, which it holds (40%) in joint venture with Freeport McMoran Copper & Gold.
This site was impacted by lower grades (0.62% copper, 0.54 grams per tonne gold and 2.41gpt silver) and mill throughputs, resulting in only 100t of the metal being produced in the March quarter.
Closer to home, its 80% owned Northparkes copper-gold operation in New South Wales has started hitting its straps following access to higher grades from the E48 block cave development, with 9300t of copper produced in the March quarter and 15,000oz of gold.
Meanwhile, waiting in the wings is Rio’s giant Oyu Tolgoi copper-gold-silver project in Mongolia, which it holds in JV with Ivanhoe Mines, and is counting down to a 2013 start-up.
Shares in Rio Tinto were down 1.63%, or $A1.33, in morning trade to $80.22.