The agreement to develop the Simandou project follows a non-binding deal signed in March by Chalco's parent, Chinalco, and is the Chinese group's first non-aluminium investment overseas.

Beijing has recently given both Chalco and Chinalco the green light to add more assets to their core aluminium businesses, allowing them to push into iron ore and secure more natural resources that are helping fuel the world's third-largest economy.

According to a Reuters report, analysts said the move would help Chalco diversify beyond a volatile aluminium market, which has seen prices swing between $3,300 and $1,300 a tonne in two years.

"It's probably a good thing for investor sentiment," said UBS analyst Patrick Dai. "Investors will probably hope that Chalco will become equally diversified in the future, which will then reduce its reliance on aluminium alone."

The Simandou venture is expected to begin production within five years, according to a statement on Thursday from Rio, in which Chinalco holds a stake of around 9 percent.

The joint venture will hold a combined 95 percent of the project, with International Finance Corp owning the rest.