Ground Breakers: Rio Tinto places more chips on lithium and BHP pulls out of Noront race

Rio Tinto (ASX:RIO) has doubled down on its diversification into lithium, outlaying US$825 million to take over Argentine brine explorer Rincon Mining.

The company, part of the portfolio of private equity player Sentient Equity Partners, will see Rio make a big splash in the new energy commodity, with the company also aiming to develop its US$2.4 billion Jadar mine in Serbia.

Jadar carries significant risks of Rio with the frosty reception local communities and environmentalists have given the Anglo-Australian mining giant, culminating in large protest rallies over the past month and the suspension by local authorities of a zoning plan to support the mine’s development.

Rincon has technical risks.

While most Argentine lithium brines are processed into lithium carbonate with large, water intensive evaporation ponds, Rio plans to use direct lithium extraction techniques instead.

Excitement about that method of extracting lithium and the rising force of the market for the battery metal has underpinned ASX-listed Lake Resources (ASX:LKE) into market darling status this year.

Rincon holds 83,000 hectares of territory on the Salar del Rincon in the Salta Province, part of Argentina’s Lithium Triangle.

Rio says the DLE tech proposed for the project could significantly increase recoveries compared to solar evaporation ponds, with a pilot plant currently operating on site.

Key to Rio’s push into lithium — its chosen form of exposure to the battery and EV thematic against BHP’s commitment to nickel — is backed by its belief in the forecast fundamentals.

Rio says lithium demand is forecast to grow 25-35% each year over the next decade with a “significant supply demand deficit expected from the second half of this decade”.

It also feeds into Rio’s promise to decarbonise its portfolio, the subject of a US$7.5 billion infrastructure pledge this decade.

“This acquisition is strongly aligned with our strategy to prioritise growth capital in commodities that support decarbonisation and to continue to deliver attractive returns to shareholders,” Rio CEO Jakob Stausholm said.

“The Rincon project holds the potential to deliver a significant new supply of battery grade lithium carbonate, to capture the opportunity offered by the rising demand driven by the global energy transition.”

“It is expected to be a long life, low-cost asset that will continue to build the strength of our Battery Materials portfolio, with our combined lithium assets spanning the US, Europe and South America.”

Rio will conduct studies and environmental assessments once it takes Rincon on, and upgrade its N43-101 resource to JORC 2012 standard. The deal requires Australian FIRB approval, which is expected in the first half of 2022.

Rio Tinto share price today:

Enough is enough on Noront war

A battered and bruised BHP (ASX:BHP) nickel division has raised the white flag in its power struggle with Andrew Forrest over Canadian “Ring of Fire” nickel explorer Noront Resources.

BHP finally decided enough is enough after Forrest’s Wyloo Metals went nuclear by trumping the Big Australian’s C$0.75 a share bid with a 47% premium C$1.10 a share bid valuing the non-producing nickel company at around $600 million.

Forrest already owned ~37% of Noront through his Wyloo brand, with both parties proving unwilling to work with each other at the junior miner after month-long talks to partner up broke down.

BHP digs nickel now but viewed the price to trump the Forrest bid as too high after the Noront board acknowledged it as a superior proposal overnight.

“BHP is committed to its strict capital discipline framework,” chief development officer Johan van Jaarsveld said.

“While the Eagle’s Nest deposit is a promising resource, we do not see adequate long-term value for BHP shareholders to support an increase in BHP’s offer in order to match the C$1.10 per share proposal from Wyloo Metals Pty Ltd.”

Wyloo head Luca Giacovazzi said it is an “exciting time to be an investor in future facing metal projects”.

Forrest has significant battery metals interests through Wyloo, which holds investments in a host of WA nickel companies. His iron ore miner Fortescue Metals Group (ASX:FMG) has also become a bellwether green energy stock after diversifying into hydrogen and green energy.

“This is an exciting time to be an investor in future facing metal projects,” Giacovazzi said.

“Battery and hydrogen technologies are unleashing the full potential of renewable energy and the supply of critical metals simply isn’t keeping up. This is the greatest shift in the global economy since the industrial revolution.”

“The Ring of Fire is home to expansive deposits of these metals, making this a once-in-a-generation opportunity to be part of the green revolution.”

“Working hand-in-hand with First Nation and regional partners, we’ll develop the Ring of Fire into one of Ontario’s great mineral districts that will be pivotal in the world’s transition to a lower carbon future.”

To the winner goes the spoils, although just who comes out on top in this bout will take a while to figure out.