Rio Tinto agrees $2bn land deal with Aboriginals

Demand for iron ore has been rising on the back of growth in Asian economies

Rio Tinto's expansion plans have been boosted by the company securing a major land deal with Aboriginals in Western Australia.

Under the deal, Rio will pay almost $2bn (£1.2bn) over 40 years to owners in return for access to their resource-rich land.

Rio Tinto has been looking to expand its operations and increase its iron ore production in Australia by 50%.

Rio is the world's second-biggest miner of iron ore.

The miner said that it had signed deals with five aboriginal councils, giving it access to almost 70,000 square kilometres of land to explore for iron ore and other minerals.

'Future prosperity'

Rio said the native communities stood to gain substantially from the deal.

According to the deal, Rio will ensure that 14% of its workers are Aboriginals and also 14% of its contracts will go to local Aboriginal businesses.

"We have ensured this is linked to our future prosperity," said Janina Gawler, Rio's chief negotiator.

"As new mines come on, traditional owners are beneficiaries," she added.

However, some analysts were concerned that the actual financial benefits to the land owners may not be substantial.

"On the surface, the deal sounds positive, but whether they will get all the benefits is still a big question," said David Taylor and independent market analyst in Sydney.

"The land owners are not going to get much cash in hand," he added.

Consistency factor

Analysts said the deal was key to Rio's expansion plans as it looks to cater to growing demand for minerals and other resources from Australia.

"Its a landmark commitment that Rio has made," said David Lenox of Fat Prophets.

"From a business point of view, it was a necessity to come to such an agreement," he added.

Mr Lenox said the fact that Rio had negotiated terms with five councils covering such a big land area had taken away a lot of hassles from the company.

"They key is that they do not have to negotiate with individual land owners now," he said.