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The world’s largest iron ore producer Rio Tinto Ltd said on Wednesday it would team up with its biggest customer China Baowu Steel Group to develop an iron ore project in Western Australia for $2 billion.
Rio said it would invest $1.3 billion to develop the project and will hold a 54% stake, while China Baowu will hold the remaining stake and will invest $700 million. “Western Range’s annual production capacity of 25 million tonnes of iron ore will help sustain production of the Pilbara Blend from Rio Tinto’s existing Paraburdoo mining hub,” it said.
Pilbara Blend products are known for their high-grade quality and consistency, and make up about 70% of Rio Tinto’s iron ore product portfolio, according to the miner’s website.
The deal is subject to approval from the governments in Australia, state of Western Australia, China, as well as Rio shareholders.
Rio and China Baowu also entered a sales agreement that will see China Baowu, the world’s top steelmaker, buy up to 126.5 million tonnes of iron ore over about 13 years. Construction at the project is expected to start in early 2023, with first production anticipated in 2025, Rio Tinto said.
The deal comes after Beijing’s recent push to centralise purchases of iron ore stoking worries of a hit to mining giants such as Rio, BHP Group and Fortescue Metals.
In July, a giant mineral resources group was set up in Xiongan New Area, North China’s Hebei province, in a long-awaited move that is expected to give the country a bigger say in iron ore pricing. Read more …
Rio had said last week it had established a strategic partnership with the new Chinese state-owned agency created to centralise iron ore purchases.