Rio Tinto (NYSE:RIO) and Hancock Prospecting have announced on Tuesday a joint investment of $1.61 billion to develop the Hope Downs 2 iron ore project in Western Australia's Pilbara region. A 50-50 investment will drive a significant expansion of the long-standing Hope Downs Joint Venture between the two companies.

"Approval of Hope Downs 2 is a key milestone for Rio Tinto, as we invest in the next generation of iron ore mines in the Pilbara," Rio Tinto Iron Ore Chief Executive Simon Trott said in today's announcement.

"These projects are part of our strategy to continue investing in Australian iron ore and to sustain Pilbara production for decades to come, supporting jobs, local businesses, and the state and national economies," he added.

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The investment will fund the development of two new above-water-table iron ore pits at Hope Downs 2 and Bedded Hilltop. With a combined annual production capacity of 31 million tons, the new deposits will extend the life of the Hope Downs operations, which commenced in 2007. Ore from the new pits will be transported to the existing Hope Downs 1 processing facility. First ore is expected in 2027.

The project scope includes non-process infrastructure precincts, haul roads, rail crossings, and a realignment of a 6-kilometer stretch of the Great Northern Highway.

Rio Tinto's share in the $1.61 billion investment is part of a broader capital expenditure plan, with the miner intending to spend over $13 billion between 2025 and 2027 on new mines, equipment, and infrastructure.

"The Pilbara has been critical to global steel supply for more than 60 years, and we are committed to ensuring it remains so well into the future," Trott said.

Hope Downs 2 has secured all required State and Federal approvals. Rio Tinto has actively engaged with the Nyiyaparli, Banjima, and Ngarlawangga Peoples, as well as with government bodies, to manage heritage and environmental considerations.

The project is expected to create over 950 jobs during the construction phase and, once operational, approximately 1,000 full-time roles across the Greater Hope Downs complex.

Hope Downs 2 is part of Rio Tinto's broader plan to maintain a mid-term iron ore production capacity of 345 to 360 million tons per annum from its Pilbara operations. The company is also conducting a pre-feasibility study on the Rhodes Ridge project, one of the most promising undeveloped iron ore deposits in the region.

Still, according to the research firm BMI, the long-term outlook for iron ore is subdued. Prices are forecast to average $100 per ton in 2025 but are expected to decline to $78 per ton by 2034 gradually. While short-term demand from China remains resilient, BMI anticipates a structural shift in its economy toward less steel-intensive sectors and expects steady global supply growth to moderate prices over the next decade.

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