BHP, Rio Tinto Are Joining Forces to Boost Iron Ore Pipeline

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(Bloomberg) — BHP Group and Rio Tinto Group, the world’s two biggest mining companies, are poised to join forces in Australia’s Pilbara iron ore hub to add 200 million tons in annual output of the steelmaking material.

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The two miners will consider collaboration on two projects — Rio’s Wunbye deposit and BHP’s Yandi — to boost production over the longer term, according two non-binding agreements announced in a joint statement on Thursday.

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“Together we will extend the life of these operations,” Rio’s Iron Ore Chief Executive Officer Matthew Holcz said in the statement. “We can better leverage existing infrastructure to unlock additional production with minimal capital requirements.”

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While the world’s mining giants are increasingly pivoting to copper and other metals needed for the energy transition, they’re still looking for ways to sustain iron ore revenues. Huge volumes of the steelmaking material are needed to feed demand from Asian economies that are expanding as China’s infrastrucutre boom fades.

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Rio is the biggest iron ore miner in the Pilbara, closely followed by BHP. The companies said the latest plans build on a 2023 agreement that allowed for mining across some tenements with shared boundaries. 

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Thursday’s announcement covers two memoranda of understanding: one to explore collaboration to develop Rio’s undeveloped Wunbye deposit, the other for BHP to supply some output from an expanded portion of its Yandi mine for processing at Rio’s facilities. First production from the joint projects would arrive early next decade, they said.

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The Pilbara has long been the mainstay of global iron ore production, sending billions of tons to China over the past quarter-century to feed the country’s booming economy. However, miners like Rio and BHP are grappling with lower-quality ores, which translates into lower prices.

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Miners are trying to balance growth against capital discipline, and are increasingly looking at ways to squeeze efficiencies out of existing infrastructure. Both Rio and BHP have also sought to sell non-essential infrastructure to release cash.

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BHP recently sold a major stake in its power network that fuels its iron ore operations for $2 billion to BlackRock Inc.’s Global Infrastructure Partners LP, to channel funds into priority areas such as copper. 

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(Updates with details throughout.)

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