Rio Tinto has signed an agreement with the Madagascar government on the future fiscal arrangements for their QIT Madagascar Minerals (QMM) joint venture (JV).

The parties have also renewed their long-term collaboration for the sustainable operation of the QMM mine located in Fort Dauphin, Madagascar.

Rio Tinto said the new agreement was confirmed by the High Constitutional Court of Madagascar earlier this month.

Located in the Anosy region of south-eastern Madagascar, QMM produces ilmenite which is a chief source of titanium dioxide.

Rio Tinto has an 80% stake in QMM, while the remaining 20% is held by the Madagascar government.

According to the terms of the agreement, the royalty rate will increase from 2% to 2.5% and QMM will issue its first dividend to the Madagascar government this year.

Rio Tinto will also cancel $77m in advances made to the government to finance their funding of QMM.

The government will hold a 15% free carry ownership of QMM and retain its 20% voting right, without the requirement to contribute to capital funding or exposure to dilution.

Besides, the government will invest a $12m dividend in the 109km rehabilitation project of the National Road 13 (RN13).

Rio Tinto will also pay up to $8m for the road project, which will be contingent on predefined milestones and deadlines.

The project is expected to enhance the region by making the movement of people and critical supplies easier to difficult-to-reach areas.

Rio Tinto iron and titanium managing director Sophie Bergeron said: “Rio Tinto is committed to the responsible development of its mineral sands extraction business in Madagascar.

”This agreement is a significant milestone to support a long-term future for QMM and reaffirms our commitment to provide increased benefits for all parties, including the communities of Madagascar.”

A Convention d’établissement (framework agreement) signed by Rio Tinto and the government in 1998 provided the foundation for the former’s investment of $1bn in QMM during the last 25 years.