BHP and Rio Tinto will collaborate on extracting iron ore from deposits straddling their adjacent Pilbara operations, marking an unusual alliance between Australia’s largest miners amid intensifying pressure from Chinese buyers and emerging global competition.
The companies announced Thursday they would jointly mine up to 200 million tons of iron ore located on the boundaries of the neighbouring Yandicoogina and Yandi facilities, according to a report in the Financial Times. Initial production is anticipated early next decade, pending final investment approval.
The agreement emerges as BHP remains engaged in protracted negotiations with China Mineral Resources Group, Beijing’s state-backed centralised iron ore purchaser, fuelling speculation that Australian producers may forge closer Pilbara partnerships to counter pricing pressures.
Tim Day, who oversees BHP’s Western Australian iron ore operations, told the Financial Times that sharing infrastructure and expenses would benefit both enterprises. “This is a clear example of productivity in action — unlocking new opportunities by making the most of our existing resources,” he said.
The Pilbara’s iron ore reserves have driven Australia’s economy for decades but face challenges from new international supplies, notably Guinea’s Simandou project in which Rio holds a stake. Analysts suggest Pilbara operators are exploring cost reduction measures and accessing fresh deposits as established mines age, said the newspaper.
Kaan Peker of RBC Capital Markets said investors and market dynamics are pressuring miners. “Capital discipline is the key driver but you can conclude that pressure from CMRG would [also] be a catalyst for driving this,” he said.
Huw McKay, a visiting fellow at The Australian National University and former BHP economist, described the partnership as demonstrating increased pragmatism. “Usually egos get in the way,” he said. “But the synergies that come from co-operation are starting to be codified.”
