Rio Tinto's Chile deal is a bet on unproven tech and lithium price bounce

The Star

21-05-2025

FILE PHOTO: A brine pool reflects clouds at a lithium mine in the Atacama salt flat, close to San Pedro de Atacama area, Antofagasta region, Chile May 4, 2023. REUTERS/Ivan Alvarado/File Photo
SANTIAGO (Reuters) - Global miner Rio Tinto will tackle one of the biggest technological challenges in the lithium industry as it takes the lead in Chile's first major project involving the battery metal in years, alongside state-run copper producer Codelco.
Maricunga marks a new pivot in Rio's lithium ambitions and a turning point for Chile, which will add a third project extracting the metal used in electric vehicles after decades of stagnation in the sector.
Rio will own just under half of the project, but will spearhead design, construction, operation and sales, Codelco announced on Monday.
A major challenge is deploying new technology, called direct lithium extraction, to separate lithium from salty brine liquid that is meant to be more environmentally friendly and efficient than conventional methods, industry experts say.
The method has yet to be proven widely in the industry and has never been used in Chile at commercial scale.
The technical challenge at Maricunga, one of the world's most lithium-rich salt flats, comes against a backdrop of uncertainty for lithium prices, which have fallen nearly 90% since late 2022 due to oversupply and weak demand for EVs.
"Scaling it in line with global demand timelines remains uncertain," said Nicole Porcile, a partner at mining consulting firm Anagea. "The ability to deliver at scale, efficiently and reliably will be a decisive factor in the project's competitiveness and investor confidence."
Rio has a DLE pilot plant at its Rincon project in Argentina, and recently acquired U.S.-based Arcadium, which employs a mix of DLE and traditional extraction methods.
That DLE know-how gave Rio an edge over three final competitors to partner with Codelco, said a person familiar with the deal. Still, Rio and Codelco must now hammer out which kind of DLE will work sustainably and effectively at Maricunga.
"That's certainly the goal: to develop and operate this in the most environmentally friendly manner possible because Codelco is well aware that they'll be under the microscope," the person said.
Codelco's search for a Maricunga investor attracted Middle Eastern, Chinese and Western companies, the person added. Construction is expected to start in three to five years, once environmental permits are updated.
Codelco has proposed a gradual transition to DLE, but Rio Tinto is aiming to use DLE from the start, with lower costs relative to other DLE projects, said a second person familiar with the matter.
ARGENTINA EXPERIENCE
Rio Tinto told Reuters its Argentina experience provided strong footing for future projects.
"We are therefore confident in the application of our technology to Maricunga and potentially to other lithium salt flats in Chile," a spokesperson said.
Rio will spend up to $900 million on the project. It is the only major mining company to bet heavily on lithium, accelerating its push with a second deal in six months at a time of low market prices.
"We have not heard from investors that they want to see further investment in lithium," said analysts at RBC Capital Markets in a note.
Rio is also in the running for Chile's Altoandinos lithium project controlled by state mining body ENAMI, which expects to announce a partner by the end of May.
The process is independent from Maricunga, in which Codelco hired investment bank Rothschild to scout for candidates.
Codelco, meanwhile, is set to soon close a deal to partner with Chile's SQM at the Atacama salt flat.
Benchmark Minerals analyst Federico Gay noted that Rio and Codelco will have to carefully prioritize. "Too many fronts (are) open for both companies, in a moment when justifying large investments for lithiumischallenging."
Rio Tinto, which could be granted an intellectual property permit if its DLE technology is used for the project, will hold a majority of seats on a technical committee with Codelco, and move to a 50-50 split once production begins, according to a filing with Chile's financial regulator.
(Reporting by Daina Beth Solomon in Santiago and Clara Denina in London; Editing by Rod Nickel)