By Rhiannon Hoyle

 

Rio Tinto PLC said it has agreed to form a joint venture with China Baowu Steel Group Corp. Ltd. to develop the $2-billion Western Range iron-ore project in Australia's Pilbara region.

The Anglo-Australian mining company and China's state-owned Baowu, its biggest iron-ore customer, also intend to sign a sales agreement for Baowu to buy almost half of the mine's production over a roughly 13-year period. Rio Tinto wants to develop the project to help sustain production of the company's core Pilbara Blend iron-ore product from its existing Paraburdoo mining hub.

Rio Tinto said it will own 54%, and Baowu 46%, of the venture that will develop the 25-million-metric-ton a year Western Range project. Rio Tinto's share of the cost would be $1.3 billion, which is already included in its capital expenditure guidance for the next two years, the company 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," said Rio Tinto iron ore chief Simon Trott. The miner recently opened Gudai-Darri, its 17th iron-ore mine in the Pilbara, which it started building in 2019.

The planned Western Range sales agreement would include up to 126.5 million metric tons of iron ore--Baowu's 46% share in the anticipated 275 million tons to be produced from Western Range--to be sold at market prices, Rio Tinto said.

The plans need to be approved by Rio Tinto shareholders, Chinese Government regulatory agencies, and state and federal governments in Australia.

Rio Tinto and Baowu have partnered on iron-ore mining in Australia's Pilbara since 2002, when they signed a joint venture to develop the Eastern Range deposits. The companies are also working together to find ways to cut carbon emissions from steelmaking processes.

"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," said Baowu Resources Chairman Shi Bing.

Construction of the Western Range project is slated to start early next year, and the site should be producing iron ore in 2025, said Rio Tinto.

 

Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com

 

(END) Dow Jones Newswires

September 13, 2022 21:01 ET (01:01 GMT)

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