Chinese move to shift Rio stake in iron ore project CHINA plans to remove its stake in Rio Tinto's $US20 billion Simandou iron ore project in Guinea from the scrutiny of stockmarket investors, flagging a transfer of the interest from Hong Kong-listed Chalco to its unlisted state-owned parent, Chinalco. In a filing to the Hong Kong Stock Exchange, Chalco said the move was being made to reduce the call on cash from the listed entity, which could indicate the parties are gearing up to start spending bigger amounts. Chinalco is also Rio's biggest shareholder. Rio, Chalco and the World Bank have spent more than $US3bn on Simandou (including a $US700 million "settlement payment" to Guinea to hang on to it) but have yet to nail down an investment framework under which the project can go ahead. In August, Guinea, which has the right to take a stake in the project, and the partners signed a draft agreement targeting a 2018 production start and outlining a framework under which a third-party operator of rail and port infrastructure could be brought in. This agreement is yet to be finalised, it is believed, because Guinea and Chalco would prefer a 2017 first-production target. Chalco said it would conduct the sale of its 65 per cent stake in Chalco Iron Ore Holdings -- which holds China's stake in Simandou -- at a "fair and reasonable" price after negotiations. "The transaction will reduce future capital expenditures of the company, improve cashflows and lower its gearing ratio, thus facilitating the company to improve its asset structure," Chalco said. Chalco Iron Ore's total assets are valued at $US1.84bn, representing the cost of the equity investment in Simandou. Rio declined to comment on whether the move had any significance for the project, other than to say it did not change direct shareholdings in the project. Chalco said the transfer to its non-listed parent was dependent on the approval of shareholders, Rio and the Chinese government. The Simandou mining concessions are 51 per cent-owned by Rio. Chalco owns 45 per cent and the World Bank's International Finance Commission owns the rest. Guinea has the right to take up to 35 per cent (15 per cent at no cost) of the mine and 51 per cent of a still to be built 650km multi-user railway and port. Simandou is being designed to produce between 95 million and 100 million tonnes of iron ore a year, which is a little less than half the 237 million tonnes a year Rio can now produce from its big Pilbara operations.