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China Baowu Steel Group is considering buying a minority stake in BHP’s (NYSE: BHP) Jimblebar iron ore mine in Western Australia, a move that could deepen Chinese involvement in one of the miner’s biggest operations, two sources told Reuters.

The world’s largest steelmaker is weighing a 15% to 25% interest that would come directly from BHP’s holding, according to the report. Jimblebar produced about 62.5 million tonnes of iron ore in fiscal 2026, roughly a quarter of BHP’s iron ore output.

BHP owns 85% of Jimblebar, while Japanese trading houses Itochu and Mitsui hold minority interests. The mine, valued at about $3.2 billion when it opened in 2014, produces ore worth roughly $6.2 billion at current prices.

Baowu has expressed interest but has not made a decision, and there is no certainty that talks will result in a transaction, Reuters reported.

A deal would give the Chinese steel giant a direct interest in a major source of the raw material used to make steel for construction, automobiles and other industries, while potentially strengthening commercial ties between one of Australia’s largest miners and its biggest customer market.

Trade ties

Chinese investment in Australia has faced greater scrutiny in recent years as Canberra tightened its approach to transactions involving strategically important resources, including lithium and rare earths.

The potential investment also comes after BHP and China Mineral Resources Group resolved a six-month dispute in April, clearing the way for Chinese steel mills to resume purchases of some BHP iron ore cargoes that had been blacklisted.

BHP and Baowu already have ties in efforts to reduce emissions from steelmaking. The companies conducted commercial-scale trials using BHP’s Pilbara iron ores for direct reduced iron production at a Baowu facility, with the material deemed suitable for the process.

Baowu has also previously partnered with Australian miners. In 2022, it struck a deal with Rio Tinto to develop an iron ore project in Western Australia.

Strategic supply

An investment in Jimblebar would give Baowu greater exposure to Australian iron ore at a time when China remains central to global steel demand and Australian producers depend heavily on the country as an export market.

For BHP, selling part of its Jimblebar holding could bring a major customer directly into the ownership structure while leaving the miner with control of the operation. For Baowu, a stake could provide closer access to the raw material feeding its production of steel sheet, coils, bars and rods.

Any transaction, however, would come against the backdrop of Australia’s increased scrutiny of Chinese investment in critical and strategic resources, potentially adding a regulatory dimension to negotiations.

(With files from Reuters)