Japanese trading house Mitsui & Co will take a US$5.3 billion stake in Rio Tinto’s 6.8 billion tonne Rhodes Ridge iron ore project in the Pilbara.
Japanese trading house Mitsui & Co will take a 40 per cent stake in Rio Tinto’s 6.8 billion tonne Rhodes Ridge iron ore project in the Pilbara.
The Tokyo-headquartered outfit on Wednesday announced its US$5.3 billion acquisition of the Wright family's VOC Group’s 25 per cent interest and Angela Bennett's AMB Holdings’ 15 per cent stake in the project.
Both deals are contingent on regulatory approvals and are expected to be finalised within 12 months and would value Rhodes Ridge at US$13bn ($20bn).
Rio Tinto holds 50 per cent of the Rhodes Ridge project, with AMB Holdings to retain a 10 per cent interest following the transaction.
An AMB Holdings spokesperson said Mitsui's interest was testament to the quality of the project.
"We are delighted to have signed a Heads of Agreement to bring in Mitsui & Co to partner with AMB Holdings and Rio Tinto to develop this important project," they said.
"Importantly, there is strong alignment between Mitsui, Rio Tinto and AMB with our shared commitment to the protection of environmental, cultural and biodiversity value during the development and operations of Rhodes Ridge, and we are excited about the potential for green mining for the future."
A VOC Group spokesperson said the group had no ambition to directly participate in developing Rhodes Ridge.
"However it wishes to see Rhodes Ridge ultimately become a production asset as part of its ongoing family legacy in the Pilbara region.
"VOCG felt it was an appropriate time to exit its ownership stake with the Rhodes Ridge Joint Venture agreement having recently been modernised, initial studies having been completed and the Pre-Feasibility Study having commenced.
"VOCG embarked on this sale process in a strategic and considered manner with priority placed on identifying a purchaser that not only recognises the intrinsic value in the project but will also facilitate continued development of Rhodes Ridge."
Rio Tinto on Wednesday said a pre-feasibility study on the project was expected to be completed this year, and that first ore was penciled in by 2030.
Under the deal, if approved, Mitsui is expected to take a 16mtpa share of Rhodes Ridge’s initial production.
That would grow to 40mtpa at full capacity.
“Rhodes Ridge will be developed and operated by Rio Tinto,” Mitsui chief executive Kenichi Hori said in a statement.
“As the existing Robe River iron ore project, in which Mitsui is participating and for which Rio Tinto is also the operator, is geographically close to the project, synergies are expected by utilizing existing infrastructure such as railways and ports, and by blending ores.”
Rhodes Ridge is one of the world’s largest undeveloped iron ore deposits.
For comparison, Rio Tinto's Simandou total mineral resource is 2.8 billion tonnes.
Importantly for Rio Tinto, the project’s average ore grade of 61.6 per cent would help to reverse declining grades in the Pilbara.
Most of the project’s resource is above the 62 per cent cut-off grade preferred by Chinese steel mills.
Mitsui & Co is no stranger to Rio Tinto or Western Australia.
A January Business News feature detailed the diverse investment in Western Australia by Japanese trading houses, with Mitsui & Co topping the list.
The company has been partnered with Rio Tinto and Nippon Steel in the Robe River Joint Venture since 1972.
It is also a major player in WA’s salt industry where it produces 4mtpa per year from Onslow and Shark Bay.
The Rhodes Ridge deposit was discovered in the 1970s and became bogged down in years of litigation between the descendants of iron ore pioneers Lang Hancock and Peter Wright.
Hancock's share of Rhodes Ridge was extinguished by the High Court in 2013.
Backed by Andrew Forrest, Cazaly Resources also made a failed bid to snap up the deposit.
