PERTH (miningweekly.com) – Diversified miner Rio Tinto and China Baowu Steel Group Co. will joint venture (JV) on the $2-billion development of the Western Range iron-ore project in the Pilbara.
Rio said on Wednesday that Western Range’s yearly production capacity of 25-million tonnes of iron-ore will help sustain production of the Pilbara Blend from Rio’s existing Paraburdoo mining hub. The project includes construction of a primary crusher and an 18 km conveyor system linking it to the existing Paraburdoo processing plant.
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 told shareholders.
“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 KV, and we are looking forward to extending our partnership at Western Range,” Rio iron-ore CEO 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.
“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.”
Rio’s $1.3-billion share of the capital costs are already included in the group’s capital expenditure guidance of around $9-billion to $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 and Baowu have also agreed to enter into 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. This volume represents Baowu’s 46% interest in the anticipated 275-million tonnes of production from Western Range through the JV.
“The signing of the JV 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 JV has been successfully operating for more than 20 years, leading us to a win-win result, and reaping friendship and trust,” Baowu Resources chairperson Shi Bing said.
“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 and Baowu’s partnership in the Pilbara dates back to the 2002 Bao-HI JV to develop the Eastern Range deposits in the Hamersley Ranges and Western Range, subject to a production cap of 200-million tonnes. It is now expected the production cap will be sourced entirely from Eastern Range, and this transaction will continue Rio’s relationship with Baowu through development of Western Range.
The transaction with Baowu is subject to satisfaction of various conditions precedent, including approvals from Rio shareholders, the Australian government, Chinese government regulatory agencies and the Western Australian government, among others.
A general meeting of both Rio Tinto Limited and Rio Tinto plc is planned for October 25.