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. Last Updated: 07/27/2016

Norilsk Joins Forces With Mining Giant

British-Australian mining giant Rio Tinto on Friday emphasized its strategic interest in Russia, saying it is ready to pour hundreds of millions of dollars into its newly formed joint venture with Norilsk Nickel.

The joint venture, in which Norilsk will hold a majority 51 percent, is being set up to explore and develop nonferrous and precious metal deposits in greenfield sites in southeastern and eastern Siberia.

"I see this as being very much a long-term relationship with Norilsk," Rio Tinto head Leigh Clifford said at a news briefing on Friday.

Analysts compared Rio Tinto's tie-up to Norilsk to BP's entry into the Russian oil industry with TNK.

The first details of the new company emerged late Thursday, when the contract between the companies was signed in the presence of Natural Resources Minister Yury Trutnev.

Both Rio Tinto and Norilsk declined to say how much they plan to invest in the joint venture, or how any future profits might be divided. The deal does not involve any exchange of assets, they said.

The entry of foreign capital into Russian metals and mining projects has been politically sensitive for several years now, as the Kremlin warned domestic producers against seeking the sale of significant parts of their assets abroad.

The fact that Trutnev was present at the signing has now led analysts to predict that the joint venture might be primed for grander projects than greenfield exploration and could win exploration licenses for some of Russia's biggest deposits in forthcoming tenders.

Maria Kalvarskaya, a metals analyst with CIT Finance brokerage, named tenders for the license to develop the Udokan copper field, with reserves of 20 million tons, and the 1,000-ton Sukhoi Log, Eurasia's largest gold deposit, as the most likely projects the new joint venture would be allowed to win.

"It looks like Norilsk Nickel is being primed to win those tenders. [It has a] political blessing," Kalvarskaya said. Both tenders will take place in the first half of this year.

The political influence seems to shift Russia's second-largest copper producer, UGMK, until last year the favorite for the Udokan field, out of the running, said Timothy McCutcheon, a metals analyst with Aton. UGMK is now in direct competition with Kazakhmys in the search for other copper deposits in the CIS, he added.

The country's third-largest copper miner, Russian Copper, would lack the funds to win and then develop the massive Udokan field, Kalvarskaya said.

"The government has given its blessing for a large global mining company to come in and invest in one of the biggest domestic metals firms. This is very significant for the sector, and we're going to see other multinationals coming in," McCutcheon said.