Rio Tinto has agreed to create a joint venture (JV) with China Baowu Steel Group (Baowu) to develop the Western Range iron ore project in the Pilbara region of Western Australia with an investment of $2bn.

The mining major will have 54% ownership in the joint venture, while Baowu will hold the remaining 46% stake.

Rio Tinto’s share of the investment will be $1.3bn.

The miner and Baowu already have an iron ore JV called Bao-HI Ranges, which was formed in 2002. Bao-HI Ranges has been engaged with production from the Eastern Range mine in Western Australia.

Baowu Resources chairman Shi Bing said “The signing of the joint venture agreement for the Western Range Project is a significant event in the history of cooperation between Baowu and Rio Tinto.

“We fully appreciate the persistent efforts of both teams in accomplishing the important achievement. The Bao-HI joint venture has been successfully operating for more than 20 years, leading us to a win-win result, and reaping friendship and trust.”

With a yearly production capacity of 25 million tonnes of iron ore, the Western Range project is expected to help maintain production of the Pilbara Blend from the existing Paraburdoo mining hub, said Rio Tinto.

The Paraburdoo mining hub comprises three operating mines, which are the Paraburdoo, Channar, and Eastern Range projects.

Western Range includes the construction of a primary crusher along with an 18km long conveyor system to connect it to the existing Paraburdoo processing plant.

Rio Tinto has also agreed to an iron ore sales agreement with Baowu pertaining to the Western Range iron ore project. This will be at market prices and will cover up to 126.5 million tonnes of iron ore over nearly 13 years.

The volume under the sales agreement represents 46% of Baowu’s interest in the expected 275 million tonnes of production from the new iron ore project through the JV.

Rio Tinto iron ore chief executive Simon Trott said “We have enjoyed a strong working relationship with Baowu for more than four decades, shipping more than 200 million tonnes of iron ore under our original joint venture, and we are looking forward to extending our partnership at Western Range.

“The development of Western Range represents the commencement of the next significant phase of investment in our iron ore business, helping underpin future production of the Pilbara Blend, the market benchmark.”

The Western Range JV is subject to approvals from Rio Tinto’s shareholders, the Australian government, the Western Australian government, Chinese government regulatory agencies, and certain other regulatory approvals and preceding conditions.