First Quantum to take majority stake in Rio Tinto’s Granja copper project in Peru

First Quantum Minerals (TSE: FM) has agreed to partner with Rio Tinto (NYSE: RIO; ASX: RIO) to develop the La Granja project in Peru, forming a joint venture that will give it a majority stake in one of the largest undeveloped copper deposits in the world.

Under the deal, First Quantum will acquire 55% of the project for US$105 million, and commit to fund all up to US$546 million in capital and operational costs to take the project through a feasibility study. First Quantum will become the project operator. The transaction is expected to complete by the end of the third quarter.

Rio Tinto acquired La Granja from the government of Peru in 2006 and has since carried out an extensive drilling program that expanded the resource and understanding of the orebody, and established partnerships with host communities, local and national governments.

La Granja currently ranks as the fourth largest copper project in the world, and Peru is the world’s second biggest copper producer.

“La Granja is an exciting but complex project that has the potential to be a significant new source of the copper that is needed for the energy transition,” Rio Tinto Copper chief executive Bold Baatar said in a statement. “We are pleased to enter into this agreement with First Quantum, that will bring our combined development capabilities and deep knowledge of La Granja to progress the project.”

Baatar added that developing La Granja would also further strengthen Rio Tinto’s copper portfolio following the acquisition of Turquoise Hill Resources and beginning of underground mining at Oyu Tolgoi in Mongolia.

“Rio Tinto’s work on La Granja has been extensive to date and we share our partner’s view that the project has the potential to be a Tier 1 copper mine,” First Quantum CEO Tristan Pascall said. “We look forward to working together to build on this foundation, leveraging First Quantum’s core strengths in mine design, project development and community engagement to progress La Granja to the next stage.”

La Granja is located at high altitude in Cajamara, northern Peru and has an inferred resource of 4.3 billion tonnes grading 0.51% copper.

The companies also said they have entered into a memorandum of understanding to cooperate in exploration and development of copper and other base metals projects globally, and will share knowledge around best-in-class mining, processing, and decarbonization practices.

The investment in Peru comes despite political turmoil in the country that saw protesters invade mine sites, block roads earlier this year following the removal of former President Pedro Castillo in December after attempting to dissolve Congress.

First Quantum recently resolved a dispute with the Panamanian government over royalties that temporarily shut its giant Cobre Panama mine in February. After reaching an agreement that guarantees a minimum annual income of US$375 million to the Central American government, the mine resumed operations in March.