Rio Tinto partners with Codelco to develop lithium project in...

Rio Tinto partners with Codelco to develop lithium project in Chile's Salar de Maricunga

Moin Pete,
I can agree with you on many points.

Remarkable deal that Rio and Codelco have concluded.First of all, I'm surprised that Rio has given Chile the green light as a jurisdiction at all.The conditions will probably be similar to those of SQM:

• Majority share (50.1%) & controlling interest is held by Codelco
• Codelco is subject to a 40% additional tax on public companies
• Higher costs are due to the expected increase from expected partial DLE use

FINANCIAL EVALUATION until 2030

• SQM keeps only 25% of the total cash flow
• The State (incl. Codelco) keeps 75% of the total cash flow
• After 2030, the conditions for SQM will deteriorate. The state will generate 79%, Codelco only 21%.

Even if Rio Tinto had negotiated better agreements, the exorbitantly high price paid for the resource would still remain. Maricunga is an excellent resource. The magnesium impurity level of 6.63 Mg/Li ratio is acceptable, although I have often surmised (Graph 2) that for e.g. Eramets DLE problems at the Centenario Ratones project are due to the impurities. Incidentally, the Mg/Li ratio here is 3.0. with lithium conc. grade of 383(mg/L). The higher Mg impurity level at Maricunga is compensated to some extent by above-average lithium grades of 1.122 (mg/L). But this in no way justifies the purchase price on a resource basis.To illustrate this, here is a current comparison of the last purchases / sales.Important! I have only considered the resource "HMW" without "Candelas"here!



and for completeness, here is a similar resource comparison with Eramet's ‘Centenario Ratones (is already a few months old, not updated)



Conclusion: From a project economics perspective, the RIO deal is incomprehensible. Other, probably strategic reasons must play a significant role from Rio's point of view.However, the blatant undervaluation of Galan's resource base is once again more than clear.

Have a nice weekend