SYDNEY, Mar. 16 -- Anglo-Australian miner Rio Tinto (RIO.AX: Quote) is in talks with China's top aluminium group, Chinalco, to develop the massive Simandou iron ore project in Guinea at an expected cost of $12 billion, an Australian newspaper said on Tuesday.
A venture between Rio Tinto and Chinalco would mark a turnaround for the companies after Rio last year scrapped a $19.5 billion equity and asset tie-up with the state-owned Chinese firm in a falling-out that also hurt Australia-China relations.
The Age newspaper, without citing any sources, said negotiations over the venture were in progress ahead of a weekend visit by Rio Chief Executive Tom Albanese to Beijing.
If the venture gains approval, Chinalco, Rio's biggest single shareholder, would finance the next stage of pre-development with Rio as the senior partner in the joint venture, The Age said.
Rio Tinto declined to comment on the report, but highlighted comments by Albanese over the past six months that the company was talking to China about possible joint mining projects.
Rio Tinto (RIO.L: Quote) last year postponed development of the Simandou iron ore concession amid a slump in global metals demand, a company-wide programme of spending cuts and political problems in Guinea. As the economic recovery gathers pace, demand, particularly from resource-hungry China and India has recovered rapidly and the company is stepping up spending again.
Albanese has called Simandou the world's biggest undeveloped iron ore deposit, with an estimated 2.25 billion tonnes of ore.
The collapse of the Rio-Chinalco alliance last year damaged ties between Australia and China. A month later, at the height of fraught iron ore negotiations, China arrested four Shanghai-based Rio Tinto staff, including Australian citizen Stern Hu, on allegations of spying and bribery, deepening the rift.
Chinalco plans to further expand overseas and expects major breakthroughs this year. It is also talking to Rio about participating in the Oyu Tolgoi copper-gold project in Mongolia, Chinalco President Xiong Weiping told Reuters on Monday.
Albanese, a regular visitor to China, is going to Beijing this weekend to attend the China Development Forum.