Rio will team up with its biggest customer – China Baowu Steel Group – to develop the Western Range iron ore project in the Pilbara.
Rio Tinto and Baowu announced on Wednesday they had agreed to enter into a joint venture on the project, with a total investment of $US2 billion ($2.96 billion).
Rio will invest $US1.3 billion ($1.92 billion) and hold a 54 per cent stake in Western Range, with Baowu paying $700 million ($1.03 billion) for the remaining 46 per cent.
“This is a very significant milestone for both Rio Tinto and Baowu, our largest customer globally,” Rio Tinto Iron Ore chief executive Simon Trott said.
“The development of Western Range represents the commencement of the next significant phase of investment in our iron ore business, helping underpin future production of the Pilbara Blend, the market benchmark.”
Western Range’s annual production capacity of 25 million tonnes of iron ore will, according to Rio, help sustain production of its Pilbara Blend from the miner’s existing Paraburdoo hub.
The Western Range project includes construction of a primary crusher and an 18km conveyor system that will link it to the existing Paraburdoo processing plant. Construction is expected to begin in early 2023, with first production anticipated in 2025.
Rio and Baowu also entered a sales agreement that will see Baowu buy up to 126.5 million tonnes of iron ore over approximately 13 years.
“The signing of the joint venture agreement for the Western Range project is a significant event in the history of cooperation between Baowu and Rio Tinto,” Baowu Resources chairman Shi Bing said.
“We fully appreciate the persistent efforts of both teams in accomplishing the important achievement.
“We hope that the two parties will deepen the mutually beneficial and win-win partnership, continue to carry forward the spirit of sincere cooperation and further expand cooperation in more fields and aspects on the basis of working together to operate the project well.”
Rio Tinto is the world’s largest iron ore producer. Its Pilbara Blend products “are the world’s most recognised brand of iron ore and are known for their high-grade quality and consistency”.
“Our Pilbara Blend products make up approximately 70 per cent of our iron ore product portfolio. It is also the largest and most liquid iron in the market today,” the company said on its website.