Over 67 billion! Global giants “luxury” to increase yards of lithium carbonate

Over 67 billion! Global giants “luxury” to increase yards of lithium carbonate

Recently, Rio Tinto, the global mining giant, announced that it has approved 2.5 billion US dollars for the expansion of the Rincon lithium industry project in Argentina.

It is reported that Ruikang has an annual production capacity of 60,000 tons of battery-grade lithium carbonate, which consists of 3,000 tons of start-up devices and 57,000 tons of expansion devices. 2.5 billion U.S. dollars of investment will be used for the expansion of the plant, which is planned to start construction in the middle of 2025, but we need to obtain the permit. Rio Tinto is confident in this and is actively promoting the application for the relevant licenses. According to the plan, the expansion plant is expected to start production at first in 2028, and then reach full production after three years of enhancement. Construction of this new 3,000-ton factory has continued, and the first batch of products have been delivered.

Wikipedia notes that this is Rio Tinto's second recently announced investment in lithium resources, just over two months apart, with a combined total investment of up to 9.2 billion US dollars (about RMB 67.039 billion). 

On October 9, Rio Tinto and Arcadium Lithium jointly announced a definitive agreement. Under the agreement, Rio Tinto will acquire all of Arcadium's shares for 6.7 billion US dollars in all cash. The price is not only higher than previous market expectations of 4 billion-6 billion US dollars but also represents a 90% premium to Arcadium's closing price of 3.08 US dollars per share on October 4 of this year. The acquisition is expected to close in mid-2025.

Strong lithium resources and diversified lithium products are among the key reasons Rio Tinto acquired Arcadium. Data show that Arcadium is one of the world's largest integrated producers of lithium chemicals, headquartered in Philadelphia, the United States, in January this year, officially merged by Australia's Allkem and the United States Livent, has been listed on both the New York and Australia, with more than about 2,600 employees around the world, the main customers include Tesla, BMW, Ford, General Motors, Panasonic Energy, SES and others. Currently, Arcadium has 6 major lithium resources, 3 of which are in operation, namely Fenix Salt Lake in Argentina (annual production of 32,000 tons of LCE), Olaroz Salt Lake in Argentina (yearly production of 43,000 tons of LCE), and Mt Cattlin Lithium Mine in Australia (annual production of 130,000 tons of lithium concentrate). The other three under construction are the James Bay lithium mine, Sal de Vida Salt Lake, and Cauchari Salt Lake. However, in September this year, Arcadium announced that it will suspend the Mt Cattlin mine's Stage 4A waste stripping and Stage 3 expansion investment, and plans to move the Mt Cattlin mine into care and maintenance status in the first half of 2025, after completing Stage 3 mining and ore processing. In the meantime, Arcadium has suspended its Galaxy project in Quebec and delayed part of the expansion of its Fenix project. Currently, Arcadium has an overall annual production capacity of 75,000 tons of LCE (lithium carbonate equivalent) and plans to more than double that capacity by the end of 2028. The acquisition will also make Rio Tinto the world's third-largest lithium producer behind U.S.-based Arboretum and Chile's SQM, a media report said.

Founded in 1873 and headquartered in the United Kingdom, Rio Tinto is engaged in the exploration, mining, and processing of global mineral resources and is a global iron ore giant. The company's business includes four major product groups, namely the Aluminium Group, the Copper Group, the Industrial Minerals Group, and the Iron Ore Group.

Deep probe Rio Tinto more time twice trenchant increase yards of lithium resources behind the reason, the long-term prospects for lithium is full of confidence is the core thrust.

In the official statement of the previous acquisition of Arcadium, Rio Tinto said it expects the compound annual growth rate of lithium demand will be more than 10% by 2040, which will lead to a supply shortage. With spot lithium prices down more than 80 percent compared to peak prices, this counter-cyclical acquisition has considerable long-term upside for the market and the portfolio. However, the price of lithium carbonate continues to move lower.

According to SMM spot quotes, as of 17 December, domestic battery-grade lithium carbonate spot quotes fell to RMB 74,500~77,300/tonne, with the average price quoted at RMB 75,900/tonne. Therefore, in response to Rio Tinto's two huge investments, several analyses believe that it is expected to enhance the lithium market confidence, and may also stimulate the market ushering in a wave of mergers and acquisitions.

CITIC Securities previously pointed out that Rio Tinto's premium acquisition of Arcadium shows the optimism of overseas mining companies on the lithium price, which will bring more confidence to the market, lithium assets mergers and acquisitions will also enhance industry concentration, lithium prices downward space is limited.

In addition, according to SMM, the recent global lithium mining giant SQM of Chile said it is full of confidence in the future of the pure electric vehicle market, and believes that as the potential of China's electric vehicle demand continues to be released, the demand for lithium market will continue to rise. Global lithium demand is expected to reach approximately 1.2 million metric tonnes by 2024, a significant increase. By 2030, the market share of pure electric vehicles could reach 70%, driving lithium demand up by 90%, with China contributing 78% of global lithium demand.

Overall, the price of lithium carbonate is still under pressure to go down, but the growth prospects of new energy vehicles are certain, so the lithium industry is widely favored in the medium to long term.