Rio Tinto’s Strategic Lithium Moves Spark Optimism

Mining and metals giant Rio Tinto Group (LON: RIO) has been gaining attention from analysts and investors alike for its strategic investments and projects focused on lithium, a critical component in the production of electric vehicle (EV) batteries. As the demand for EVs rebounds, Rio Tinto is positioning itself to be a major player in the provision of lithium, which is essential for this rapidly expanding market.

Rio Tinto is well-recognised as one of the largest global players in the mining sector, with a strong portfolio in copper, aluminum, and diamonds. Yet, it is the company's foray into lithium that is causing a stir in the market. Their involvement in key lithium projects—such as the Rincon project in Argentina and the Jadar project in Serbia—reflects a determined effort to meet Europe's growing lithium needs.

The significance of these projects is underscored by Rio Tinto's potential involvement in the Altoandinos project in Chile. If the company is selected to develop lithium assets here, it could see a tripling of output by 2037, with an ambitious target of 20,000 metric tons of production by 2032.

Copper remains a cornerstone of Rio Tinto's operations, and the metal's significance cannot be overstated, especially considering the company's production targets. Rio Tinto aims to mine between 660 to 720 kilotonnes (kt) of copper in 2024, with plans for a 3% annual growth in production spanning from 2024 to 2028. This growth is anticipated to be propelled, in part, by the Oyu Tolgoi underground copper mine, which is expected to yield an impressive 500,000 tonnes of copper annually from 2028 to 2036.

The enthusiasm of analysts towards Rio Tinto's prospects is quantifiable, with an average price target representing a potential of 20%.

Hedge funds' interest also lends further credence to its positive projection. In the second quarter, 29 hedge funds had positions in Rio, with Fisher Asset Management holding the largest share, possessing 17.04 million shares valued at approximately $1.12 billion. This substantial investment from a prominent fund underpins the confidence in Rio Tinto's strategic direction, particularly in the promising realm of lithium and the future of electric vehicles.