Rio Tinto and China Baowu Steel group to develop iron ore project in Australia
Rio Tinto and China Baowu Steel Group Co. Ltd. have agreed to jointly develop the Western Range Iron ore project in Pilbara, Western Australia.
Rio Tinto will control 54 percent of the joint venture with Baowu controlling the remaining 46 percent. The joint venture will invest $2 billion to develop the mine, Rio Tinto said in a statement.
Western Range’s annual production capacity of 25 Mt (27.5 million st) of iron ore will help sustain production of the Pilbara Blend from Rio Tinto’s existing Paraburdoo mining hub. The project includes construction of a primary crusher and an 18 km (11 mile) conveyor system linking it to the existing Paraburdoo processing plant.
“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. “We have enjoyed a strong working relationship with Baowu for more than four decades, shipping more than 200 Mt (220 million st) of iron ore under our original joint venture, and we are looking forward to extending our partnership at Western Range.
“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. At the same time, Rio Tinto and Baowu continue to work together on low-carbon steelmaking research, exploring new methods to reduce carbon emissions and improve environmental performance across the steel value chain,” said Trott.
Construction is expected to begin in early 2023 with first production anticipated in 2025. The construction phase will support approximately 1,600 jobs with the mine requiring about 800 ongoing operational roles which are expected to be filled by existing workers transitioning from other sites in the Paraburdoo mining hub.
Rio Tinto’s share of the capital costs are already included in the group’s capital expenditure guidance of around $9-10 billion for each of 2023 and 2024. Both parties will pay their portion of capital costs for the development of the mine, and mine operating costs, plus a nominal ongoing resource contribution fee calculated by reference to Western Range production volumes. There is no upfront consideration being paid by either party, Rio Tinto said in a statement.
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 Mt (139.4 million st) of iron ore over approximately 13 years. This volume represents Baowu’s 46 percent interest in the anticipated 275 Mt (303 million st) of production from Western Range through the joint venture.
Rio Tinto and Baowu’s partnership in the Pilbara dates back to the 2002 Bao-HI Joint Venture to develop the Eastern Range deposits in the Hamersley Ranges (Eastern Range) and Western Range, subject to a production cap of 200 Mt (220 million st). It is now expected the production cap will be sourced entirely from Eastern Range, and this transaction will continue Rio Tinto’s relationship with Baowu through development of Western Range.
Baowu Resources Chairman Shi Bing said, “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.
“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 has worked closely with the Traditional Owners on whose country Western Range is situated, the Yinhawangka People, to co-design a Social and Cultural Heritage Management Plan for the project, designed to protect significant cultural and heritage values in the area.
The plan, which was agreed with Yinhawangka Aboriginal Corporation and announced earlier this year, outlines protocols for joint decision-making on environmental matters and mine planning.
“We have worked in partnership with the Yinhawangka People to jointly develop a Social, Cultural and Heritage Management Plan as part of our commitment to protecting significant cultural and environmental values at Western Range,” Trott said.