Rio Tinto Group has announced a major $2.5 billion investment to expand its Rincon lithium project in Argentina. This move aligns with President Javier Milei’s push to deregulate the country’s economy and attract foreign investment. As demand for lithium continues to soar, this expansion positions Rio Tinto as a significant player in the battery materials market.
Scaling Up Lithium’s Next Frontier
The Rincon project in Argentina’s Andean salt flats is set to become one of the world’s leading lithium operations. It is part of the “lithium triangle”, home to over half of global resources.
The expansion will enable an annual production capacity of 60,000 metric tons of battery-grade lithium carbonate, up from its current 3,000-ton starter plant. Construction of the expanded facility will begin in mid-2025, subject to permitting, with the first production scheduled for 2028. The project’s full ramp-up to capacity is anticipated to take three years.
This ambitious undertaking is a response to the booming demand for lithium, a.k.a. white gold. It is a key component in electric vehicle (EV) batteries and renewable energy storage. Despite recent declines in lithium prices due to oversupply and a dip in EV demand, Rio Tinto is forging ahead.
Jakob Stausholm, Rio’s CEO, emphasized that the long-term outlook for lithium remains robust, driven by the global shift toward green energy. He further noted that:
“Building on Argentina’s supportive economic policies, skilled workforce, and exceptional resources we are positioning ourselves to become one of the top lithium producers globally. 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.”
Leveraging Innovative Technology
The Rincon project will use direct lithium extraction (DLE) technology, a novel method that is considered more environmentally friendly than traditional lithium extraction techniques. Unlike conventional methods, consuming large quantities of water, DLE conserves water, reduces waste, and ensures consistent production of high-quality lithium carbonate.
Currently, 13 DLE projects are operational, with a combined output expected to reach 124,000 tonnes in 2024. Benchmark data predicts DLE could supply 14% of global lithium by 2035, producing 470,000 tonnes of lithium carbonate equivalent (LCE). This projection highlights its growing importance in battery and EV markets.
However, according to RBC Capital Markets analyst Kaan Peker, while DLE holds promise, it also carries risks due to its relatively unproven nature. Potential challenges include cost overruns, delays in ramp-up, and technological hurdles. Despite these concerns, Rio Tinto remains confident in its ability to deliver on its commitments.
Argentina’s Lithium Boom: Policy Meets Opportunity
The Rincon investment underscores Argentina’s potential as a global lithium powerhouse. The South American nation is the world’s 4th-largest lithium producer and boasts the largest lithium reserves globally.
Argentina’s lithium production could surge from 43,719 metric tons in 2023 to over 261,000 metric tons by 2027. By 2028, it is set to overtake Chile as South America’s leading lithium producer, capturing 13.1% of global lithium production, a significant rise from 4.4% in 2023. This growth is bolstered by record-breaking mine production and lithium reserves as seen below.
The country’s economic reforms, spearheaded by President Milei, have created a favorable environment for foreign investors. Central to this effort is the Incentive Regime for Large Investments (RIGI), a legislative framework offering tax benefits, currency stability, and trade incentives. These measures provide regulatory certainty for 30 years, safeguarding projects like Rincon from future policy changes.
Stausholm described Rincon as a “poster child” for the RIGI program, praising the initiative’s ability to attract and protect foreign investments. Rio Tinto’s decision to proceed with Rincon’s expansion highlights the company’s confidence in Argentina’s resources, workforce, and supportive policies.
Beyond Rincon: Rio’s Bold Moves in the Battery Market
Rio Tinto’s investment in Rincon is part of a broader strategy to position lithium as a cornerstone of its commodity portfolio. The company recently acquired Arcadium Lithium, a U.S.-based miner, for $6.7 billion, signaling its commitment to becoming a leading player in the lithium market.
Moreover, Rio is exploring lithium opportunities in Chile, including a potential stake in Codelco’s Maricunga project. The mining giant is also planning to build Europe’s largest lithium mine in Serbia.
Despite the challenges posed by fluctuating lithium prices, Stausholm affirmed Rio’s commitment to accelerating Arcadium’s projects and ensuring the timely delivery of Rincon’s additional production. By 2028, Rincon’s output can significantly contribute to the global lithium supply.
In addition to lithium, Rio Tinto is also keen on expanding its footprint in Argentina’s copper sector. Through its Nuton venture, the company holds a stake in the Los Azules copper project, which recently cleared key permitting hurdles.
Stausholm expressed Rio’s interest in furthering its copper investments in Argentina, emphasizing the importance of delivering on existing commitments before pursuing new opportunities.
Rio Tinto’s $2.5 billion investment in the Rincon lithium project marks a significant milestone in its efforts to build a world-class battery materials portfolio. This investment not only strengthens Rio Tinto’s position in the global lithium market but also highlights Argentina’s emergence as a key player in the energy and mining sectors.
By leveraging advanced technology like DLE, committing to sustainable practices, and capitalizing on Argentina’s favorable investment climate, Rio Tinto’s project could play a pivotal role in the green energy transition.
