Rio Tinto accelerates lithium push with $1.15b deal

Rio Tinto will spend $US825 million ($1.15 billion) to accelerate its push into lithium by acquiring an undeveloped project close to Orocobre’s flagship Olaroz operation in Argentina.

Rio will acquire the Salar del Rincon project from Sydney private equity group Sentient Equity Partners. The deal comes after months of community opposition to Rio’s $US2.4 billion plan to build Europe’s biggest lithium mine in Serbia’s Jadar Valley.

Lithium is an important element in the energy transition as it helps to store energy in the modern batteries that power everything from consumer electronics to electric vehicles. The deal is the latest sign that Australia’s biggest miners are switching their focus to the minerals that will be required to power the energy transition.

BHP has also vowed to invest more in “future facing” commodities like nickel, copper and potash, but suffered a setback on Wednesday when it conceded defeat in the bidding war for Canadian nickel explorer Noront Resources.

Noront will now likely be acquired by private companies owned by Australian billionaire Andrew Forrest, after BHP said its “strict capital discipline framework” would prevent it from matching Mr Forrest’s bid.

Rio’s push into lithium is at odds with the view held by BHP, which has insisted in recent years that an abundant supply of lithium will leave producers making slim margins even as demand for the battery mineral soars.

Rio doubled down on its alternative view on Wednesday, saying demand for lithium would exceed supply in the near future.

“The market fundamentals for battery grade lithium carbonate are strong, with lithium demand forecast to grow at 25 per cent to 35 per cent per annum over the next decade with a significant supply demand deficit expected from the second half of this decade,” Rio said in a statement.

The rapid pace of the energy transition over the past decade has led to rapidly changing perceptions about the prospects for different commodities within the big mining companies. Less than five years ago, BHP was offering to pay suitors to take its Australian nickel assets off its hands, but now sees the division as one of its preferred centres for investment and growth.

Like most lithium assets in South America, Salar del Rincon will be a lithium “brines” project, meaning the lithium will be produced by extracting groundwater from beneath a dry salt lake.

But unlike most lithium brines projects including Orocobre’s Olaroz – which is located about 60 kilometres away – Rio will not use evaporation ponds to concentrate the lithium.

Rio will instead take on some technology risk by using a “direct lithium extraction” (DLE) method, where the groundwater is pumped into a processing plant and a resin used to extract the lithium, before the groundwater is returned underground.

Rio believes the method is more environmentally friendly, given less of the scarce water resources in the high deserts of the Andes mountains are lost to evaporation.

Rio believes DLE also requires less energy to heat the groundwater than traditional lithium brines projects, disturbs less of the landscape by not requiring the construction of giant evaporation ponds and has “the potential” to deliver better lithium recoveries than traditional brines projects.

Lithium brines projects are notoriously slow and difficult to get into production even when the traditional method is used, but once operating steadily, they produce lithium carbonate at much lower costs than the hard rock lithium mines that dominate the Australian lithium industry.

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