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Rio Tinto’s $2.5 billion lithium plan is a win for Milei
In the wake of Javier Milei’s recent election, Argentina has sparked significant interest in its mining sector through the implementation of an ambitious incentives program, known locally by its acronym RIGI. This initiative offers a variety of tax, currency, and trade benefits tailored specifically for the energy and mining industries, offering a secure legal framework for investors over the next three decades.
Jakob Stausholm, CEO of Rio Tinto, recently emphasized the importance of the RIGI program, indicating its potential as a model for successful investment strategies in resource-rich countries. According to Stausholm, while RIGI may not provide absolute guarantees, it enhances investor protection substantially, reflecting Argentina’s proactive approach to optimizing its mining sector.
Rio Tinto has identified lithium as a key component of its investment strategy, reinforcing its commitment to the burgeoning market in Argentina, which is recognized as the fastest-growing lithium producer globally. This follows their $6.7 billion acquisition of U.S.-based Arcadium Lithium Plc last October. Concurrently, Rio is also exploring potential investments in Chile, including a partnership with Codelco for the Maricunga project, and is planning the development of Europe’s largest lithium mine in Serbia.
Despite a recent decline in lithium prices due to increasing inventories and a declining demand for electric vehicles, Rio Tinto remains undeterred. The company plans to expedite the development of Arcadium’s projects, aiming to introduce additional lithium production to the market from their Rincon project by 2028. Located within Argentina’s Andean salt flats, Rincon is part of the renowned “lithium triangle,” which hosts more than half of the world’s lithium reserves. Rio Tinto acquired this property over two years ago for approximately $800 million and has since commissioned a 3,000-ton starter plant at the site. Notably, Rincon stands to become one of the first commercial-scale projects utilizing innovative direct extraction methods that are touted to be more environmentally friendly.
Analyst Kaan Peker from RBC Capital Markets has pointed out that while the technology used in Rincon has potential benefits, it also entails significant risks, particularly pertaining to costs, project ramp-up, and capital expenditures. The unique nature of the project may affect these factors and require careful navigation.
As the landscape for lithium production evolves, companies like France’s Eramet SA and South Korea’s Posco Holdings Inc. have initiated new lithium plants in Argentina, marking a noteworthy resurgence in local production capacity. Simultaneously, there is an emerging interest from international investors aiming to explore copper opportunities in Argentina. Rio Tinto holds a stake in the Nuton venture associated with the Los Azules copper project, which has recently cleared essential permitting stages. Stausholm expressed Rio’s continuing interest in copper exploration within Argentina, emphasizing the importance of ensuring successful execution at Los Azules.
In summary, Argentina’s strategic overhaul of its mining incentives through the RIGI program heralds a new era of investment in its lithium and copper industries. By creating a more favorable environment for mining companies and emphasizing sustainable extraction methods, the country seeks to capitalize on its rich natural resources while navigating the challenges posed by fluctuating market dynamics.
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