Event description
According to Rio Tinto, the company has reached a binding agreement to acquire Rincon mining under sentientequitypartners for $825 million. The core assets of the subject company are Rincon salt lake lithium resource project and the salt lake lithium extraction technology developed based on the project.
Event comments
Salardel Rincon: a large green salt lake brine project with complete mining rights and over 10 million tons of resources but mediocre lithium concentration. Rincon Salt Lake is located in Salta Province, Argentina, with an altitude of 3765 meters. Rincon mining controls a total of 830 square kilometers of mining rights, covering 94% of the salt beach area. A small number of non core mining rights around it belong to argosy and other companies. According to the resource and reserve report updated in July 2021, Rincon mining has: (1) total reserves of 1.9846 million tons of LCE (lithium carbonate equivalent), with an average lithium concentration of 359 mg / L. (2) proven + controlled resources of 5.8024 million tons of LCE, with an average lithium concentration of 367 mg / L, and inferred resources of 5.9655 million tons of lce, with an average lithium concentration of 390 mg / L. (3) according to some section samples, the magnesium lithium ratio is 9.4 ~ 10.8. We believe that Rincon’s lithium concentration is in the “lithium triangle” in South America Located in the second and third lines, the magnesium lithium ratio is higher than that of the main salt lakes in South America, but it is still ideal worldwide. In addition, Rincon is also a large salt lake project with few remaining and complete mining rights in Argentina, so it has a certain scarcity.
Key elements: Rincon Salt Lake has ideal infrastructure conditions and abundant fresh water supply. (1) Road: the national highway connects the project with the capital of Salta. In addition, there is a railway line 30 km away, leading to the Chilean port Antofagasta and the Argentine capital Buenos Aires, which is convenient for material supply and product transportation. (2) Fresh water: according to the geological survey, the fresh water under the alluvial fan surface can support an annual production capacity of more than 100000 tons, and the company has obtained an almost exclusive right to use fresh water. (3) energy: the project is only 1km away from the high-voltage power grid across the Andes, and the company has also signed an intention collaboration with a large photovoltaic power station around the salt lake. (4) Salta’s mining policy is generally friendly, and the project is not far from olaroz, cauchari olaroz and other salt lakes under production and construction in northern hujui province. It is expected to form a cluster effect in the future.
The design adopts raw halogen adsorption, with an annual output of 50000 tons of lithium carbonate and a total investment of 770 million US dollars. The lithium extraction process around Rincon Salt Lake has been developed for nearly 20 years, resulting in a large amount of sunk costs. In view of the mediocre lithium concentration and high magnesium content in the salt lake, adsorption has become the preferred scheme. Sentient has developed a set of patents for direct adsorption and extraction of lithium from raw brine in conjunction with Australian government scientific research institution ANSTO, and has built a pilot plant in the mining area. The process has an annual output of 25000 tons, which has passed the environmental impact assessment. However, the updated summary study has doubled the design capacity to 50000 tons of lithium carbonate, with a capital investment of about US $770 million and an estimated operating cost of US $2968 / ton.
Behind the win-win deal: the green transformation ambition of mining giants and the profound lithium resource anxiety of the global new energy vehicle industry. We believe that the valuation of this acquisition is sufficient and the overall win-win situation has been achieved. Sentient’s long-term investment finally withdrew. Rio Tinto, a century old mining store, acquired a large-scale and more mainstream Salt Lake project on the basis of having a large boron lithium project in jadar, Serbia, which fully demonstrated its strategic determination to transform to key minerals of clean energy. However, in the future, Rio Tinto still needs to re evaluate the amount of resources and verify the lithium extraction technology. Therefore, the earliest time for Rincon to form an effective supply is 2025-2026. Further thinking, in the era of clean energy revolution, the global competition for “future white oil” – lithium resources is becoming white hot, and it is urgent to ensure supply security, which in turn confirms the strategic value of lithium resources already in hand in the world and China’s local lithium resources. We continue to recommend focusing on Qinghai Salt Lake Industry Co.Ltd(000792) investment opportunities.
Risk tips: 1. If the global lithium supply exceeds expectations and the promotion of new energy vehicles is low, the price center of lithium products will decline again;
2. If the battery technology is innovated and industrialized, the technical path of new energy vehicles outside China will be significantly replaced, and the lithium unit consumption of power and energy storage batteries will be reduced.
