Rio Tinto shares dropped 1.9% to 4,858.2p in early morning trading on Wednesday, after the group announced its joint venture with China Baowu Steel Group to develop the Western Range ore project in Pilbara, Western Australia.
Rio Tinto will reportedly invest $1.3 billion of the total $2 billion investment to develop the mine.
The mining company said the Western Range’s 25 million tonnes of iron ore would help sustain production of the Pilbara Blend from the firm’s existing Paraburdoo mining hub.
The project currently includes the construction of a primary crusher and an 18 km conveyor system linking it to the Paraburdoo processing plant.
Rio Tinto confirmed construction was scheduled to start in early 2023, with first production expected in 2025.
The mining group noted its share of the capital costs were already included in its capital expenditure guidance of approximately $9-$10 billion for each of 2023 and 2024.
Rio Tinto commented there was no upfront consideration being paid by either firm.
The two commodities companies agreed to enter an iron ore sales agreement at market prices, covering a total of up to 126.5 million tonnes of iron ore over approximately 13 years, together with the joint venture.
“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,” said Rio Tinto CEO Simon Trott.
“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.”
Baowu Resources chairman Shi Bing added: “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. We fully appreciate the persistent efforts of both teams in accomplishing the important achievement. The Bao-HI joint venture has been successfully operating for more than 20 years, leading us to a win-win result, and reaping friendship and trust.”
