Metals and mining major Rio Tinto Group (NYSE:RIO) recently revealed that the company has entered into an agreement to acquire Rincon Mining’s Argentinian lithium project from Sentient Equity Partners for $825 million. The deal is likely to close in the first half of 2022.
Following the news, shares of the company gained 2.6% during yesterday’s trading session. However, it pared its gains slightly to close at $65.62 during the extended trade.
Strategic Impact
Rincon is a large undeveloped lithium brine project located in the heart of the lithium triangle in the Salta Province of Argentina, an emerging hub for greenfield projects.
The acquisition of this project is in line with Rio Tinto’s strategy of decarbonising its portfolio as it is a scalable resource capable of producing battery-grade lithium carbonate.
The development strategy and timing, securing updates to existing Environmental Impact Assessment Permits, and engagement with the local communities will be undertaken to ensure smooth operations of the project, following the acquisition.
Management Commentary
CEO of Rio Tinto, Jakob Stausholm, said “The Rincon project holds the potential to deliver a significant new supply of battery-grade lithium carbonate, to capture the opportunity offered by the rising demand driven by the global energy transition. It is expected to be a long life, low-cost asset that will continue to build the strength of our Battery Materials portfolio, with our combined lithium assets spanning the US, Europe and South America.”
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Analyst Ratings
Recently, Jefferies analyst Chris LaFemina reiterated a Hold rating on the stock. The analyst, however, lowered the price target from $71 to $65, which implies downside potential of 1.5% from current levels.
The Street is cautiously optimistic about the stock with a Moderate Buy consensus rating based on 4 Buys and 2 Holds. The average Rio Tinto stock prediction of $74.14 implies the stock has upside potential of 12.3% from current levels. Shares have declined by about 12.3% over the past year.
Investors
TipRanks’ Stock Investors tool shows that investors currently have a Very Positive stance on Rio Tinto. Further, 2.7% of portfolios tracked by TipRanks, reduced their exposure to RIO stock over the past 30 days.
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