Rio (ASX:RIO) to form JV with Baowu to develop Western Range project

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Rio (ASX:RIO) to form JV with Baowu to develop Western Range project

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 Rio (ASX:RIO) to form JV with Baowu to develop Western Range project
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Highlights:

  • Rio to form a joint venture with China Baowu Steel Group Co Ltd to develop Western Range iron ore project.
  • Rio has 56% and Baowu has 46% interest in the iron ore project.
  • Both parties would invest a total of US$2billion to develop the mine.

Australian mining giant Rio Tinto (ASX:RIO) on Wednesday (14 September 2022) announced that China Baowu Steel Group Co Ltd has agreed to form a joint venture (JV) to develop a Western range iron ore project located in Pilbara region of Western Australia.

Baowu is one of the largest customers of Rio and has a working relationship of more than four years with the global mining giant.

Details of the joint venture

According to the ASX announcement, Rio makes up 54% interest in the Western Range, and Baowu has the remaining 46%. Both companies would invest US$2 billion to develop the project. Both parties would pay their share of the capital cost for mine development and operating cost, along with a nominal ongoing resource contribution fee.

Rio said that the annual production of the Western Range would assist in sustaining production of Pilbara Blend from the company’s existing Paraburdoo mining hub. Notably, the project includes building a primary crusher and a conveyor system that would establish a link to the Paraburdoo processing plant.

The company expects to begin construction by early 2023, with the first production expected in 2025.

According to the release, Baowu and Rio have agreed to ink an iron ore sales agreement, covering a total of around 126.5 million tonnes of iron ore (at market price) over a period of thirteen years. This volume represents the 46% interest of Baowu in the expected 275 million tonnes of production from the iron ore project.

Management commentary

Commenting on the development, Rio Tinto’s Iron Ore CEO Simon Trott, said, 

Rio share performance snapshot

Today, at 10:19 AM AEST, Rio shares were spotted trading 2.54% lower at AU$94.29 per share. The shares were in line with the benchmark index, ASX 200 Materials (INDEXASX:XMJ) which was down by 2.82% at 10:46 AM AEST.

Meanwhile, ASX 200 lost 198.90 points (2.82%) to 6,811.80 points around the same time. All eleven sectors were in red. While the A-REIT sector was the worst performer, followed by the materials sector.

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