Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Anglo-Australian miner Rio Tinto plans to invest $2.5bn in its first commercial-scale lithium production project, at Rincon in Argentina, just two months after agreeing a $6.7bn deal to buy lithium producer Arcadium.
Even though lithium prices have dropped 30 per cent this year amid a global glut that has caused many producers to scale back, Rio is betting the metal will be a core part of its future portfolio because of its essential role in electric vehicle batteries.
Chief executive Jakob Stausholm said the company’s lithium investments were “countercyclical” and that the properties of the Rincon site meant production costs would be cheap and would remain profitable even without a high lithium price.
“We are positioning ourselves to become one of the top lithium producers,” Stausholm said. “This investment, alongside our proposed Arcadium acquisition, ensures that lithium will become one of the key pillars of our commodity portfolio for decades to come.”
Rio is the only western mining major that is making big investments in lithium, with rivals such as BHP and Anglo American avoiding it entirely.
Lithium is a relatively common element, but because it is light and melts at very low temperatures it is difficult to process and producing battery-grade lithium carbonate requires huge investment in processing facilities.
At present, China accounts for two-thirds of global lithium carbonate production, causing concern in the US and Europe about securing adequate access to supplies outside China.
Rio’s investment in Rincon, which extracts lithium from brines pumped up out of the earth, will fund a commercial-scale plant producing 60,000 tonnes of battery-grade lithium a year by 2031. Construction is planned to begin next year.
Rio bought the Rincon project in 2022 for $825mn, and the first production of lithium started last week, with battery-grade production expected next year.
Stausholm said that no offtake agreements had yet been made for the plant, but that there had been “a lot of interest” from automakers.
At present, the global lithium market is suffering from severe oversupply because electric vehicle sales have grown more slowly than expected. Chinese battery maker CATL has cut lithium production at its key mine in Jiangxi province.
Meanwhile, Albemarle, the world’s largest lithium producer, reported a loss of $1.1bn in the most recent quarter because of low lithium prices and has suspended its plans to build a lithium refinery in South Carolina.
Rio’s all-cash $6.7bn acquisition of New York-listed Arcadium — which will be voted on by Arcadium shareholders on December 23 — would make the company one of the world’s largest lithium producers once completed.
https://www.ft.com/content/e3c2293e-0ec1-4572-9834-34eb328c6e5d
