Rio Tinto and First Quantum Minerals have agreed to form a joint venture (JV) to progress the next phase of development of the La Granja copper project in Peru owned by the former.

As per the terms of the agreement, the Canada-based First Quantum Minerals will acquire a 55% stake in the undeveloped copper deposit in a deal worth $105m.

Besides, First Quantum Minerals will pledge an investment of up to $546m into the JV to solely finance capital and operational costs to move the project through a feasibility study and towards development.

Rio Tinto copper chief executive Bold Baatar said: “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.

“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.”

Located at a high altitude in Cajamara, Northern Peru, the La Granja copper project has an indicated and inferred mineral resource of 4.32 billion tonnes at 0.51% copper.

The copper project was acquired by Rio Tinto from the Peruvian government in 2006 and the company has been operating it since then.

Following the closing of the transaction, First Quantum Minerals as a majority stakeholder in the La Granja project, will become its operator and focus initially on completing the feasibility study.

The company also expects to undertake possible further development of the Peruvian copper deposit.

A part of the initial investment will be utilised for the completion of the feasibility study after which the remaining amount of it will be spent on the construction of the project.

The construction will commence after a positive investment decision.

Subject to certain conditions and regulatory approvals by the Peruvian government, the transaction is anticipated to close before the end of the third quarter of this year.

Furthermore, the companies have signed a memorandum of understanding to globally collaborate in copper and other base metals exploration and project development.

First Quantum Minerals CEO Tristan Pascall said: “I am very pleased to announce today’s partnership with Rio Tinto, a global leader in the mining industry. 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.

“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.”