Rio Tinto said on Tuesday it would pay $825 million for the Rincon lithium mine in Argentina, focusing on the development of its battery-grade lithium carbonate.
As investors and governments come under pressure from polluting raw materials producers, a growing number of big mining companies are looking to expand into future-oriented commodities such as lithium, copper and even fertiliser.
Rio Tinto said Tuesday it would buy the Rincon lithium assets in Argentina from private equity firms. The Rincon lithium brine project is located in South America's so-called Lithium triangle, an area with many of the best lithium deposits. South America's Bolivia, Chile and Argentina are the world's top three lithium suppliers.
Lithium has become a core raw material for the electric vehicle industry, and major automakers from Tesla (TSLA.us) to Volkswagen need to keep increasing supplies of the battery material to speed up electric vehicle production.
This week, one of Australia's biggest lithium miners, Pilbara Minerals(PILbf.US), slashed its forecast for lithium shipments. The leftist who won Chile's presidential election, Gabriel Borici, campaigned on ecology and environmental protection, opposing privatisation of mines and possibly raising taxes on things like lithium, another potential negative for demand for lithium batteries.
In terms of lithium demand expectations, the long-term demand for lithium ore is very strong. According to BloombergNEF, the demand for lithium ore will increase more than five times by 2032.
Chris Berry, president of industry consulting firm House Mountain Partners, said the deal and a recent deal for Millennial Lithium Corp. And Neo Lithium Corp. have helped cement Argentina's position as a long-term resource for Lithium development projects.
"This acquisition is highly aligned with our strategy to prioritise commodity investments that support our decarbonisation programme and continue to deliver attractive returns to our shareholders," Jakob Stausholm, Rio's chief executive, said in a statement.
Rio also said the undeveloped project had the potential to produce battery-grade lithium carbonate.
Chris Berry says the Argentinian lithium deal is particularly important. "One of the biggest mistakes I've seen mining giants make is that they don't have a backup plan. "Rio has clearly thought through their lithium strategy."
Rio's move into lithium comes as the global price of the metal has soared, more than tripling this year to record levels as consumption has been driven up by a shift towards electrified transport. Lithium miners are ramping up capacity, but they appear unable to keep up with demand, which is likely to remain tight in the short term.
At the same time, the global battle for Lithium is becoming increasingly fierce. In early October, media reported that LG New Energy signed a Lithium off-purchase agreement with Sigma Lithium, a Brazilian Lithium miner, with an agreement scale of 60,000 tons of Lithium concentrate in 2023 and 100,000 tons per year in 2024-2027.
Zijin Mining (02899) announced in October that it would acquire all issued and outstanding common shares of the new Lithium Company in cash at a price of C $6.50 per share through a wholly-owned subsidiary incorporated in Canada. The transaction amount of the acquisition is about C $960 million, or about RMB 4.939 billion yuan.
Millennial, a Canadian lithium miner, announced on Sept. 29 that Ningde Times (30075.SZ) has agreed to acquire the company for C $377 million (1.92 billion yuan).
Some of Rio's peers have so far shunned the increasingly competitive lithium circuit but are also looking to diversify. Another mining giant, BHP Billiton (BHP.US), is trying to buy a Nickel project in Canada, which is also an important component of batteries for electric cars or renewable energy back-up. Like Anglo, the company is also considering building a large fertilizer mine.
