Rio Tinto CEO’s Big Test: What to Do With Lithium

The world’s second-largest mining company, Rio Tinto, made a bold move into the lithium market last year, a stark contrast to many of its peers who have approached the burgeoning sector with greater caution. Now, CEO Jakob Stausholm faces a critical juncture: how to navigate a landscape fraught with geopolitical complexities, community resistance, and fluctuating demand for the crucial battery metal.

Indeed, Stausholm's defining challenge isn't just about finding the next big deposit; it's about successfully bringing new supply online in a world hungry for lithium but increasingly wary of mining's environmental and social footprint. Rio Tinto's aggressive pivot into lithium in 2021-2022 was a clear signal of its belief in the energy transition and the electrification of transport. While other mining giants like BHP and Glencore largely skirted direct, large-scale lithium investments, Rio Tinto dove in headfirst.

The cornerstone of this strategy was the Jadar project in Serbia, a potentially world-class deposit that promised to be Europe’s largest source of lithium. However, what seemed like a strategic coup quickly turned into a major headache. Intense local opposition over environmental concerns, coupled with political pressure ahead of elections, led the Serbian government to revoke Rio Tinto’s exploration licenses in January 2022. This move effectively put the brakes on a project that could have supplied a significant portion of Europe's future lithium needs and represented a multi-billion dollar investment.

"You could say the Jadar experience was a harsh lesson in community engagement and political risk," one industry analyst noted, speaking on background. "It highlighted the unique challenges of developing a critical resource in a densely populated, politically sensitive region."

Undeterred, at least initially, Rio Tinto pivoted, acquiring the Rincon lithium brine project in Argentina from Rincon Mining for ~$825 million in March 2022. Located in the heart of South America's "lithium triangle," Rincon offers a different development pathway – extracting lithium from brines, which typically has a lower environmental impact than hard rock mining, though it is still water-intensive. The company aims to produce battery-grade lithium carbonate at Rincon, targeting an initial nameplate capacity of 3,000 tonnes per annum, with potential for further expansion.

The contrasting fortunes of Jadar and Rincon encapsulate the high-stakes gamble Stausholm made. On one hand, the Jadar debacle underscored the immense ESG (Environmental, Social, and Governance) pressures facing new mining projects, especially for commodities tied to the "green" transition. On the other, Rincon represents a more conventional, albeit still challenging, path to lithium production.

Meanwhile, the global lithium market has been a roller coaster. After historic price surges driven by booming electric vehicle (EV) demand, prices have seen some moderation. However, the long-term outlook remains incredibly strong, with forecasts indicating a persistent supply deficit unless significant new projects come online. Automakers are scrambling to secure lithium supplies, viewing it as a strategic imperative for their decarbonization goals.

For Stausholm, the test is two-fold: can Rio Tinto revive Jadar, perhaps under new terms or with a different approach to local stakeholders, and can Rincon be scaled up efficiently and sustainably to become a meaningful contributor to the company's bottom line? The pressure is intense. Investors want to see returns on the significant capital allocated to lithium, and the company's reputation, particularly on ESG matters, is on the line.

What's more, the lithium strategy is central to Rio Tinto's broader portfolio diversification away from its heavy reliance on iron ore. If Stausholm can successfully navigate these challenges, Rio Tinto could emerge as a dominant player in a critical future-facing commodity. Fail, and the lithium bet could serve as a costly lesson in the complexities of the energy transition. For now, all eyes are on how the CEO plans to turn this high-stakes gamble into a winning hand.