Rio Tintowill sell up to 70 million tonnes of iron ore from its Pilbara operations in WesternAustralia to China's Sinosteel Corp.over the next five years as part of two separate deals.
The global mining heavyweight said April 15 that the two companieshad extended their historic Channarmining joint venture as well as inked a separate supply agreement.
Now in its 30th year, the Channar joint venture, which is 60%owned by Rio Tinto, was the first large-scale mining initiative between Australiaand China and one of the longest running partnerships between the two nations.
The original joint venture agreement was signed in 1987 and providedfor the production of 200 million tonnes of iron ore. It was later extended by 50million tonnes.
The most recent extension will see a further 30 million tonnesof iron ore supplied into the joint venture, with state-owned Sinosteel making aone-off payment of US$45 million to Rio Tinto and providing additional productionroyalties linked to the iron ore price.
Total production royalties paid under the joint venture agreementare capped at US$500 million to comply with the U.K. Listing Authority's listingrules as Sinosteel is considered a related party of Rio Tinto.
Rio Tinto said the maximum royalty cap is expected to providesignificant headroom at both current and anticipated iron ore price scenarios.
Meanwhile, under a separate agreement, Rio Tinto will sell upto a further 40 million tonnes of iron ore to Sinosteel between 2016 and 2021.