Rio Tinto Ltd. (RTP) said Friday it has a non-binding agreement with BHP Billiton Ltd. (BHP.AU) on a joint venture of their iron ore operations in the Pilbara region of Western Australia.

Rio said the 50/50 joint venture will unlock significant value, with net present value of synergies to be more than US$10 billion as adjacent mines are combined into single operations, rail haulage is made more efficient and future growth is optimized.

The deal will see BHP pay Rio US$5.8 billion to equalize their stakes in the joint venture and take BHP's stake 50% from 45%.

"The joint venture will establish an unrivaled iron ore business with world class assets and infrastructure," Rio Chairman Jan du Plessis said in a statement.

-By Alex Wilson, Dow Jones Newswires; 61-3-9292-2094; alex.wilson@dowjones.com