Rio Tinto (ASX:RIO) has entered into a joint venture agreement with First Quantum Minerals (TSX:FM) to unlock the development of the La Granja copper project in Peru. The project, located at high altitude in Cajamara, Northern Peru, is one of the largest undeveloped copper deposits in the world, with an estimated resource of 4.32 billion tonnes at 0.51% copper.

Under the agreement, First Quantum will acquire a 55% stake in the project for $105 million and invest up to $546 million to sole fund capital and operational costs, taking the project through a feasibility study and towards development. The transaction is expected to be completed by the end of Q3 2023.

As the majority owner, First Quantum will operate the La Granja project, with initial work focussed on completing the feasibility study. Rio Tinto had acquired the La Granja Project from the Government of Peru in 2006 and has since carried out extensive drilling programs to expand the declared resource and understanding of the orebody, and established partnerships with host communities, local and national governments.

La Granja is currently the fourth-largest copper project in the world, and Peru is the world’s second-largest copper producer. The agreement between Rio Tinto and First Quantum Minerals is expected to boost the Peruvian mining industry and create new job opportunities in the region. The joint venture will also provide the necessary capital to develop the La Granja project, which is expected to become a large, long-life operation, benefiting the local communities and the country’s economy.

The joint venture agreement between Rio Tinto and First Quantum Minerals to develop the La Granja copper project in Peru is not only significant for the South American nation’s mining industry, but also for the two global mining giants involved. For Rio Tinto, the move further strengthens its copper portfolio, which was recently boosted by the acquisition of Turquoise Hill Resources and the launch of underground mining at Oyu Tolgoi in Mongolia.

On the other hand, First Quantum Minerals has been in the news lately for its dispute with the Panamanian government over royalties, which led to a temporary halt in operations at its Cobre Panama mine earlier this year. The two parties reached an agreement in March that guarantees a minimum annual income of $375 million to the Panamanian government, allowing the mine to resume operations.

With the La Granja project now on the horizon, First Quantum Minerals is expected to focus its attention on unlocking the potential of one of the world’s largest undeveloped copper deposits. The joint venture will inject the necessary funds to take the project through a feasibility study and towards development, which is likely to create new job opportunities in the region and benefit local communities.

The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a licensed professional for investment advice. The author is not an insider or shareholder of any of the companies mentioned above.