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British mining juggernaut Rio Tinto Limited (ASX:RIO) will finalize the purchase of the Rincn lithium project in Argentina in H1 2022 for $825 million. But there is more than meets the eye in this move, as the demand of this metal is bound to increase by 30% every year.
What is it that lies behind the acquisition and why is this region so strategic for lithium supply?
A Strategic Asset
According to S&P Global , Rio Tinto is acquiring the Salar del Rincn project in Argentina as the company is swiftly growing its lithium assets amid a skyrocketing demand in the automotive industry.
The Salta province in the South American country is becoming a pivot in greenfield initiatives, while the purchase will allow the firm to pounce on a lithium brine project that is able to produce battery grade lithium-carbonate more cheaply.
Jakob Stausholm, CEO Executive of Rio Tinto said, “This acquisition is aligned with our strategy to prioritize ... commodities that support decarbonization.” The energy transition will need a healthy supply of this critical element for the manufacturing of electric vehicle batteries.
What Is Lithium For?
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Lithium is essential for the making of batteries in the e-mobility industry an all its array of vehicles: electric cars, scooters, e-bicycles, e-bikes, and more. In recent years, demand has increased notably due mainly to the world’s transition to green energies, while several locations have become absolute hubs for the extraction of the coveted material.
Today, a lithium-ion battery pack for an electric car could contain around 8 kg of lithium, 35 kg of nickel, 20 kg of manganese, and 14kg of cobalt, according to figures from the Argonne Laboratory.
A June report by BNEF estimated that current reserves of the metal stand at 21 million tons and are enough to carry the conversion to electric vehicles until the middle of the century. Still, as cars become electrified, the challenge lies in increasing lithium production to meet demand, which could result in a temporary shortage and drastic price changes.
However, market setbacks will not change the landscape in the long run. "As more processing capacity is built, this shortage is likely to solve itself," says Haresh Kamath, an energy storage specialist at the Electric Power Research Institute in Palo Alto, California.
Hunting For Lithium
But Rio Tinto’s acquisition in Argentina is embedded in a bigger hunt in this particular region in South America. Salar de Uyuni, in Bolivia and geographically close to Salta —in northern Argentina— is attracting the attention of lithium miners and suppliers to a point where Teague Egan, CEO of EnergyX —a Texan company that specializes in the optimization of lithium extraction— said, “this is the new Saudi Arabia.”
This puts Bolivia on the world’s lithium map as it currently boasts one quarter of all known lithium reserves in the whole planet.
With a further eight companies —from China and Russia— competing for some lithium space in Uyuni, the words of Anna Shpitsberg, U.S. Under Secretary of State for Energy Transformation blare out loud: “The amount of lithium we need for any of our climate goals is incredible. Everybody is trying to build their supply chains and think about how to be strategic.”
China already flaunts significant lithium assets in South America, and its companies have invested around $4.5 billion in this metal in the course of three years including Mexico. Similarly, Vladimir Putin has a direct line with the President of Bolivia Lus Arce, and both have been in touch about lithium and other matters, according to Russian officials.
As lithium demand is bound to soar, the hunt for it is on.
Disclosure: No positions