(Adds detail about project and Codelco last report) SANTIAGO,...

(Adds detail about project and Codelco last report)

SANTIAGO, July 31 (Reuters) - Chilean state copper company Codelco said on Monday it would partner with Anglo-Australian miner Rio Tinto to explore a copper deposit in northern Chile.

As part of the agreement, Rio Tinto RIO.L will buy Pan American Silver's 57.74% stake in the Agua de la Falda project, located in the Diego de Almagro commune, said Codelco. The Chilean company already owns 42.26% of the project.

"Evaluations by both Codelco and Rio Tinto... indicate that there is interesting exploration potential to discover copper deposits (in the area)," Codelco said in a release.

Rio Tinto currently partners with BHP (BHP) , another Australian miner, at Chile's Escondida mine, the largest copper deposit in the world.

Chile's Codelco, the world's largest copper producer, posted last week an 86% year-on-year drop in its pre-tax profit for the

first

half of 2023.

Copper's recent fall has pressured smaller miners to raise funds, sparking bets of more consolidation in the industry.

The new partnership comes as Glencore GLEN.L

agreed to buy

Pan American Silver Corp's PAAS.TO majority stake in an Argentine copper project for $475 million on Monday.