China and Chile signed an agreement yesterday to establish a joint venture (JV) to develop copper mines in Chile. China's biggest metal trading company, China Minmetal Corporation (Minmetals), is to team up with Chile's biggest copper producer, Codelco, to establish a 50-50 joint venture with an initial investment of US$550 million.

Investment is expected to grow significantly in the future.

The JV will ensure a long-term stable copper supply to China, providing Minmetals with 55,000 tons of refined copper each year for over 15 years, said Minmetals President Zhou Zhongshu.

At the same time Chile will benefit from having greater access to capital to develop its copper projects, said Chilean Foreign Affairs Minister Ignacio Walker Prieto.

"This is a win-win agreement," he said.

It marks the first occasion Chile has allowed foreign companies to invest in the country's copper industry.

China Development Bank has been appointed the lead arranger and underwriter for a term loan facility to the JV, the proceeds of which will be used to partially fund the initial investment commitment.

Chile's Codelco has also granted Minmetals an option to acquire a minority interest in the country's Gaby copper project. Minmetals have the option to buy between 25 and 49 percent of shares in the project when Codelco decides to proceed.

China is the world's biggest copper importer with its copper consumption accounting for about 20 percent of the world's total. Last year, China imported 1.38 million tons of copper and 2.88 million tons of copper ore.

China's increasing copper demand is mainly due to explosive growth in the power generation and telecommunications sectors.

Chile is the world's biggest copper exporter with production accounting for about 37 percent of the world's total. Copper accounts for about 38 percent of the country's total exports, with 20 percent of the copper produced there being delivered to China. In 2003, Chile's copper production climbed to 4.9 million tons from 2.22 million tons in 1994, an average annual increase of 9.2 percent.

On Monday, the China-Chile Business Council, an organization that will work to enhance business and trade between the two countries, was established in Beijing.

Fifteen Chinese enterprises and 27 Chilean enterprises became the first batch of council members.

Minmetals president Zhou Zhongshu is chairman of the Chinese chapter. Chilean business delegation leader Juan Claro works as Zhou's Chilean counterpart.

In other related news, the third round of Free Trade Agreement talks between China and Chile are due to be held in Wuxi, Jiangsu Province, at the end of next month.

(China Daily June 1, 2005)