Despite the carnage dealt to the lithium price since its November 2022 highs, there are signs that true believers see golden opportunities to take early positions in the key battery materials recovery once the sector deals with current indigestion.
As calendar year 2024 come to a close, two key players have placed hefty bets on lithium’s ability to rise phoenix-like from its current ashes.
Early December, big miner Rio Tinto (ASX: RIO) showed it ‘lithium hand’ by approving the $2.5 billion expansion of the Rincon located in Argentina’s “lithium triangle”. Combining a 3,000-tonne starter plant with a newly constructed 57,000-tonne expansion facility, the project demonstrates RIO’s commitment to developing a world-class battery materials portfolio.
The development will support a mine life of approximately 40 years.
Rincon employs direct lithium extraction (DLE) which uses chemical processes, ion-exchange resins or adsorption to isolate lithium directly from brine water. Given the benefits DLE over more traditional method of evaporation ponds, Rio’s CEO Jakob Stausholm was quick to remind the market that the project aligns with Rio’s plans to become a top-tier lithium producer at the “low end of the cost curve”.
Tightening of belts
Not so the case with producers such as IGO (ASX : IGO ), telling investors today it, and JV partner Tianqi Lithium, isn't sure when it will be able to pay a dividend as depressed lithium prices continue to hit their hip pockets.
That's because they're ramping up their Kwinana-based Li2O hydroxide plant that feeds off the world's largest hard rock lithium operation, Greenbushes - which IGO owns almost a quarter of.
Lithium prices are at the bottom and have seen further production halts across other WA mines, including MinRes' (ASX : MIN ) Bald Hill being put on care and maintenance, a slowdown of Pilbara Minerals' (ASX: PLS ) Pilgangoora and a snails' pace ramp up of Liontown Resources' (ASX: LTR ) Kathleen Valley.
Not so much Rio
In addition to the money Rio has already committed to building a major presence in lithium – the Arcadium (ASX:LTM) acquisition, the big miner will have ended up invested over $20 billion creating a new growth and earnings division.
Following on the heels of Rio’s Rincon announcement, Patriot Battery Metals (ASX: PMT) revealed this week it has added Volkswagen as a strategic shareholder.
Volkswagen has snapped up a 9.9% stake in Patriot C$69 million to secure 100,000t of Li2O concentrate annually from its giant 4.88Mt Shaakichiuwaanaan lithium development in Canada’s James Bay region.
What both Rio and Patriot are banking on is the world’s auto industry going ‘all electric’, with a doubling of demand for the battery material leading to a supply deficit; the hope is that this will eventually ignite prices. Unlike Patriot, which is a ‘pure-play’, sentiment towards lithium is going to be more a lightning rod for the share price than a big, diversified miner like Rio.
While Rio ended the week down around half of 1%, investors were quick to give Patriot’s news the thumbs up.
The small cap miner’s ($222 million) share price remains 64% down over one year, it is up 24% for the week and 37% for the month.