The Rio Tinto Limited (ASX: RIO) share price hasn't been able to stand up against the broader market rout despite announcing a major new partnership with its largest global customer.
Shares in the mining giant are currently down 2.64% to $94.20 apiece. That's roughly in line with the 2.81% loss in the S&P/ASX 200 Materials Index (ASX: XMJ) and the 2.82% fall in the S&P/ASX 200 Index (ASX: XJO).
It comes as Rio and China Baowu Steel Group Co. Ltd (Baowu) announce they will invest US$2 billion ($3 billion) to develop the Western Range iron ore project in the Pilbara.
The companies have formed a joint venture (JV) where Rio Tinto will own 54% of the entity.
Rio Tinto share price getting swept up in the sell-off
However, the news couldn't save the Rio Tinto share price from diving in early trade.
The fall also comes despite a more than 1% gain in the iron ore price to around US$104 a tonne.
But Rio Tinto isn't the only ASX miner slipping this morning. The BHP Group Ltd (ASX: BHP) share price has lost 2.04% to $38.50 and Fortescue Metals Group Limited (ASX: FMG) is trading 3.89% lower at $17.52 a share.
New 25 million tonne JV
The Western Ranges annual production capacity is estimated at 25 million tonnes of iron ore. The investment from Rio Tinto and Baowu will be used to build a primary crusher and an 18-kilometre conveyor system linking it to the existing Paraburdoo processing plant.
The miner said that construction is scheduled to start in early 2023 with first production in 2025. Rio Tinto's share of the costs ($1.3 billion) is already included in its capex guidance for 2023 and 2024. Rio Tinto is forecasting a capex of around $9 billion to $10 billion in each of those years.
Sales agreement with Baowu
While there is no upfront payment consideration, the JV partners have entered into an iron ore sales agreement. Baowu will buy up to 126.5 million tonnes of iron ore over approximately 13 years at market prices.
The volume reflects the Chinese steel mill's 46% interest in the project, which is tipped to produce 275 million tonnes of ore over the period.
Rio Tinto's 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.
Long-standing partnership
Rio Tinto and Baowu have been working in partnership in the Pilbara since 2002. It formed another JV, Bao-HI, to develop the Eastern Range deposits in the Hamersley Ranges and Western Range.
Baowu Resources' chairman Shi Bing commented:
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. We hope that the two parties will deepen the mutually beneficial and win-win partnership, continue to carry forward the spirit of sincere cooperation.
Rio Tinto share price snapshot
The Rio Tinto share price has fallen 12% over the past year while the ASX 200 has declined 8%.
In contrast, the BHP share price has gained 4% while the Fortescue share price has dropped 3% over the period.
