Rio Tinto has signed a non-binding agreement to sell its stake in Simandou iron ore project in Guinea to Chinese state-owned firm Chinalco Mining Corporation.
The agreement provides the principal terms of sale as the binding agreement and is scheduled to be signed within six months.
Rio Tinto will secure payments of $1.1bn-$1.3bn based on timing of the project development.
The initial payment for shares will begin upon first production starting, on a per tonne basis.
Sale of the stake will provide an impetus to a stalled plan to develop untapped iron ore reserves in Guinea. Furthermore, it will open up opportunities for Chinese investment, reported Reuters.
Welcoming the deal, Guinea's Minister of Mines and Geology Abdoulaye Magassouba urged for setting up of a joint working group with Chinalco to push the mining industry forward.
Magassouba was quoted by Reuters as stating: "This is a very positive event for the project, but we still have long months of work and significant challenges to overcome for the effective relaunching of the project."
Rio presently owns a 46.6% interest in Simandou, Chinalco has 41.3%, while the government of Guinea has a 7.5%.