Monsters of Rock: This is why Rio Tinto is bullish on lithium
Link copied to
Rio Tinto (ASX:RIO) continues to be the outlier among the ASX mining giants by placing its chips on lithium.
BHP (ASX:BHP) thinks the market is too small and Andrew Forrest, whose Fortescue Metals Group (ASX:FMG) has floated plans to get involved in rare earths, thinks suggestions of a shortage of lithium projects are overegged.
Rio on the other hand paid US$825 million for the Rincon lithium project in Argentina last year and retains hope it can develop the massive Jadar mine in Serbia despite losing local support for the project amid public protests.
Lithium miners Pilbara Minerals (ASX:PLS) and Mineral Resources (ASX:MIN) have snuck onto the doorstep of the ASX 20 this year amid an historic price boom for the battery metal, but there remain quarters of the investment community who think a moderation of prices is coming in the next couple years.
A presentation from Rio’s technical team today, who are showing analysts around the Bundoora research facility in Melbourne, show why Rio remain bullish on the commodity.
Rio thinks lithium demand will grow 4 to 7 times by 2030, with EV sales in a net zero trajectory hitting 60 million a year by the end of the decade along with additional growth from battery storage in power networks.
They think supply bottlenecks mean the cost curve will steepen with ‘growing supply required’.
“Rapid demand growth could see prices clear the cost curve for a long period of time,” Rio says.
They say a 3000tpa LCE starter plant at the Rincon operation in Argentina’s Salta Province, de-risking a larger scale operation, could enable market entry for Rio in 2024.
Rio scientists also updated analysts on work it is undertaking on green steel research and reducing carbon emissions in copper mining.
It’s taken a bit more than a spell, but the Abra base metals mine in WA is inches from the start of production after its owner Galena Mining (ASX:G1A) announced concentrate production would begin in January.
Construction at the underground lead and zinc mine was 97% done as of November 30, with plant commissioning expected to be practically complete this month.
Around 9000t of ore has been stockpiled from early mining.
“Record underground development in November with delivery of the first 9,000t of ore to the ROM pad along with successful plant commissioning to date puts Abra on the verge of a quick transition into production,” G1A MD Tony James said.
“Recruitment and other operational readiness activities are well advanced in preparation for January production.”
Galena shares, down 16% YTD, were up more than 13% today.
That was a strong performance against a broader 1.36% fall across the materials sector, with poor real estate sales data in China hitting iron ore miners and weak gold prices hitting precious metals stocks.
MinRes and FMG were the hardest hit, down 3.76% and 4.21%, with Rio and BHP off 1.93% and 1.52% respectively.