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Rio Tinto PLC on Wednesday said it has agreed to form a joint venture with China Baowu Steel Group Corp Ltd to develop the Western Range iron ore project in Pilbara in Western Australia.
The London-based miner will own 54% of the venture, while Baowu will have 46%. The two will invest $2 billion to develop the mine, with Rio Tinto investing $1.3 billion.
Construction is expected to begin in early 2023 with first production anticipated in 2025. The deal will help Rio Tinto sustain production of the Pilbara blend, Rio Tinto's flagship project.
Rio Tinto and Baowu have also agreed to enter into an iron ore sales agreement at market prices covering a total of up to 126.5 million tonnes of iron ore over 13 years.
‘This volume represents Baowu's 46% interest in the anticipated 275 million tonnes of production from Western Range through the joint venture,’ Rio Tinto said.
The joint venture is dependent on securing approval from Rio Tinto shareholders as well as the Australian government, regulatory agencies in China and the Western Australia state government.
The company said that it has‘worked closely with the traditional owners...to co-design a social and cultural heritage management plan for the project, designed to protect significant cultural and heritage values in the area.’
Rio Tinto and Baowu have been working together in Pilbara since 2002 under the Bao-Hi joint venture.
Chief Executive Simon Trott said: ‘This is a very significant milestone for both Rio Tinto and Baowu, our largest customer globally. We have enjoyed a strong working relationship with Baowu for more than four decades, shipping more than 200 million tonnes of iron ore under our original joint venture, and we are looking forward to extending our partnership at Western Range.’
Shares in Rio Tinto were trading 0.8% lower at 4,871.00 pence each in London on Wednesday morning.
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