Mitsui Joins Rio in Australia Iron Ore Mine for $5.3 Billion
(Bloomberg) -- Japanese trading house Mitsui & Co. will buy a stake in an Australian iron ore project for $5.3 billion, in a bet that the global steel industry will need high-quality raw materials to support its push to go green.
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The company will take a 40% holding in the Rhodes Ridge site in Western Australia from two minority shareholders, it said Wednesday. Rio Tinto Group — one of the world's top two iron ore suppliers — will continue to hold 50% of the project, which is slated to start production in 2030.
The investment is a 'crown jewel asset' in the metals-rich Pilbara region and Mitsui's single-largest ever, President Kenichi Hori said in Tokyo. 'After years of relationship-building spanning across generations, we were able to negotiate for this agreement,' he said.
The swoop on an untapped resource reflects major shifts in the iron ore market as China's economy slows and steelmakers face a daunting task to decarbonize. While demand is growing at a slower pace than in the boom years of this century, more high-grade material is needed to produce steel with greener technology.
'The deal represents a continuation of the strong working relationship that Mitsui already has with Rio Tinto,' said MineLife Pty analyst Gavin Wendt. 'The deal also ensures ongoing supply of high quality iron ore for Japanese steel mills.'
Mitsui has been involved in Australia's Pilbara iron ore region since the 1960s, and has metals-related investments from Brazil to China. It's a partner with Rio at Robe River, another mine in the area.
Mitsui shares were down 1.4% in Tokyo at 3:30 p.m. local time, while Rio rose 1.1% in Sydney.
Not Developed
Mitsui is buying all of VOC Group's 25% interest in Rhodes Ridge, plus a 15% stake from AMB Holdings Pty, which will continue to hold 10%. The Japanese company will form a joint venture with Rio, which spent $77 million on studying the project in 2023, to prepare for mining.
VOC and AMB are the private enterprise vehicles of the heirs of prospector Peter Wright, who alongside business partner Lang Hancock found vast fortunes of iron ore in the region. The discoveries eventually generated a new age of billionaires in Australia, including the Wright and Bennett families behind VOC and AMB, respectively.
Rhodes Ridge is one of the world's largest undeveloped iron ore deposits, with a mineral resource estimated at 6.8 billion tons. It's expected to produce as much as 40 million tons a year in its first phase starting 2030, but Mitsui said future output could reach 100 million tons.
Rio has struggled to maintain production of superior quality iron ore grades in the Pilbara, and tapping the relatively iron-rich deposit at Rhodes Ridge may help offset declines elsewhere. The miner's much-trumpeted Simandou project in Guinea — also a high-grade source — is due to start ramping up from later this year.
Iron ore prices have tumbled from a record above $230 a ton during the pandemic to trade close to $100 a ton over the past few months. China's property crisis has ended the nation's breakneck growth in domestic steel demand, although its steel mills still made about a billion tons last year.
--With assistance from Jake Lloyd-Smith, Andrew Janes, Shoko Oda, Stephen Stapczynski and Katharine Gemmell.
(Updates with comments from Mitsui executives from third paragraph)
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