Australian mining giant Rio Tinto has inked a joint venture (JV) agreement with Minmetals, one of China’s most powerful miners, for deepening cooperation in exploration of mineral deposits in China.
The two businesses will establish a 50-50 JV by injecting funds worth 200 million yuan ($31.3 million) in total, with each party initially contributing 35 million yuan ($5.5 million) within six months after the setting-up of the JV.
Before creating the joint venture, the two sides concluded a technical agreement in November, 2017 in efforts to push ahead with their collaboration in mineral exploration.
The first target region identified under the technical agreement will be Xinjiang Uyghur Autonomous Region, which is located northwest in China.
The region, though sparsely populated, is well-known for its rich resources. According to data from the local agencies governing land and resources, the region had proven to hold reserves of 9.07 million tonnes of copper and 2.63 billion tonnes of iron ore by the end of 2015.
While the two companies will initially begin their cooperation by focusing on Chinese mineral reserves, they both pledged to expand the future collaboration to other areas in the world.
“The formalization of the exploration joint venture is an important milestone in our growing partnership with China and Minmetals, who is an increasingly important player in the global mining industry,” said Rio Tinto Chief Executive Jean-Sebastien Jacques.
“Our complementary strengths in exploration put us in the best possible position to find metals and minerals essential to human progress,” the CEO added.
In fact, Rio Tinto tried very early to tap the Chinese market and entered into a joint venture with another Chinese renown magnate miner, China Aluminium Corp (Chinalco), in 2011, contributing 49 percent of the original registered capital.
However, there was reported that Rio and Chinalco had decided to end the joint venture since little work had moved on with respect to their joint mineral exploration.
As China’s economy continues to grow and mature, it has been the world’s No. 1 consumer of resources. Rio Tinto, by supplying bulk commodities including iron ore, copper and bauxite to China, the company’s biggest customer, has gained almost half of its global revenue, said Jacques.
On the other hand, Minmetals could also benefit a lot from the joint venture in terms of its overseas expansion as its partnership with Rio starts with exploration projects in China then moves to the outside.
By way of joint venture, both parties will be able to maximize their respective advantages in exploring, developing, as well as marketing and sales, so that a win-win situation could be realized.
As commented by Guo Wenqing, president of Minmetals, “Rio Tinto has rich prospecting experience and great discoveries worldwide, while Minmetals has solid technical expertise and extensive experience – the two strong partners will drive breakthroughs, pioneer progress, and promote the exchanges and collaboration of the global resource industry.”
According to a Rio Tinto source, the venture is subject to review and final approval by regulatory bodies.