Rio Tinto to invest $2.5B to expand Rincon lithium project in Argentina

Rio Tinto (ASX, NYSE: RIO) plans to invest US$2.5 billion to increase production capacity at its Rincon lithium project in Argentina to 60,000 tonnes per year.

“The announcement shouldn’t come as a surprise, given the company’s known appetite for the metal,” BMO Capital Markets said on Thursday. “The project is already incorporated within its capex guidance.”

However, Rincon, the company’s first commercial-scale lithium operation, comes “when a number of other lithium projects are being delayed and project funding has become more challenging given lithium pricing pressure,” BMO said. 

Located in the heart of Argentina’s lithium triangle, Rincon is to use direct lithium extraction technology tapping brine through wells. First production is expected in 2028, followed by a three-year ramp-up to full capacity.

Long-term outlook

“The attractive long-term outlook for lithium driven by the energy transition underpins our investment in Rincon,” Rio Tinto CEO Jakob Stausholm said in a release. “We are dedicated to developing this tier-1, world-class resource at scale, at the low end of the cost curve.”

Shares of Rio Tinto fell 2.5% to US$63.38 per share in New York following the announcement, giving the miner a market capitalization of US$103 billion.

The capacity of 60,000 tonnes of battery-grade lithium carbonate per year includes a 3,000-tonne starter plant and a 57,000-tonne expansion plant. The mine life is expected to be 40 years, with construction of the expanded plant scheduled to begin in mid-2025, subject to permitting.

The investment follows Rio’s takeover of Arcadium Lithium in a US$6.7-billion deal announced in October, which puts Rio on track to become the world’s third-largest lithium miner, behind leader Albemarle (NYSE: ALB) and Chile’s SQM (NYSE: SQM). The announcement comes at a time when lithium prices are weakened by Chinese oversupply and a slowdown in EV sales.

Argentinian incentives

The investment also aligns with Argentina’s ambitions to become a world-leading lithium producer, Rio Tinto said in the release. 

The country’s new Incentive Regime for Large Investments offers lower tax rates, accelerated depreciation, and regulatory stability for 30 years, protecting the project from future policy changes, the company said. 

Rio’s lithium strategy also involves the Jadar project in Serbia, which would create Europe’s biggest lithium mine. However, it faces strong local opposition from environmental groups.

In July, Serbia reinstated Rio Tinto’s license to develop the project, but securing permits could take at least two years.