Rio Tinto, BHP Join Forces to Unlock More Australian Iron Ore -- 2nd Update

By Rhiannon Hoyle

Rio Tinto and BHP Group have agreed to work together on some new projects at neighboring iron-ore mines in Australia that could help bolster their future production of the steel ingredient.

The companies said that by collaborating on new projects at their neighboring Yandicoogina and Yandi iron-ore operations in Australia's Pilbara region, they could extract up to 200 million metric tons of iron ore, some of which might have otherwise been stranded.

"By working smarter, we can better leverage existing infrastructure to unlock additional production with minimal capital requirements," said Matthew Holcz, the head of Rio Tinto's iron-ore operations.

Rio Tinto and BHP are, along with Brazil's Vale, the world's largest producers of iron ore, used to make steel. BHP is the world's biggest miner by market value, and Rio Tinto the second-biggest.

The companies on Thursday said they have signed nonbinding agreements that will explore ways of collaborating on the development of Rio Tinto's Wunbye deposit, which butts up to the boundary of BHP's Yandi operations.

They will also look at whether BHP can supply ore from its Yandi Lower Channel deposit to Rio Tinto for processing at its existing wet plants. BHP doesn't have the infrastructure to process the kind of ore it would produce there.

"This is a clear example of productivity in action--unlocking new opportunities by making the most of our existing resources," said Tim Day, who leads BHP's Western Australian iron-ore mines.

First ore from both deposits is expected to be produced early next decade, if the projects are approved, the companies said.

BHP shares were 2.9% higher by midafternoon on Thursday in Sydney, while Rio Tinto was up by 0.8%.

The alliance comes as the companies work to safeguard their lucrative Australian iron-ore operations against a more-assertive China, which has sought to gain greater control over pricing of the raw material it needs for steel-intensive infrastructure projects. China buys seven in every 10 tons of iron ore traded globally.

BHP has for months been locked in iron-ore contract negotiations with China, which in 2022 established a state-run buyer to help the country get more influence over prices. That entity now oversees purchases for most of China's steel mills.

Rivals BHP and Rio Tinto have collaborated before. In 2023, they agreed to mine the Mungadoo Pillar, also unlocking ore from a shared boundary that the companies said was previously inaccessible. They are also working together to trial battery-electric haul trucks and find ways to produce lower-emissions steel from Pilbara iron ore.

At a BHP shareholder meeting in October, the miner's chair and chief executive told reporters that BHP would always consider the best way of using infrastructure, even that owned by others, to improve its operations.

Those remarks followed a research note by RBC Capital Markets analyst Kaan Peker, who questioned whether the iron-ore giants should consider some kind of alliance to help safeguard future profits from their massive operations as China's pricing influence grows.

Both Rio Tinto and BHP rely on iron ore for more than half of their earnings, although they have been investing heavily in expanding in copper, a metal they expect will be at the heart of the next commodities boom given it is essential to electric vehicles, power grids and data centers, among other things.

The two companies considered an iron-ore joint venture in the Pilbara roughly 16 years ago, but the proposed deal was scrapped, with the miners citing regulatory hurdles. More than half of all iron ore shipped globally comes from Australia's Pilbara region.

Write to Rhiannon Hoyle at [e-mail]

(END) Dow Jones Newswires

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