Ground Breakers: Rio’s been quiet on lithium, but now it’s launched into the new Lake Johnston craze

Rio Tinto is the rare mining giant that loves lithium, but it’s staying on the sidelines in major M&A so far
But it has piled cash into exploring ground held by juniors
Rio has pegged ground near TG Metals’ Burmeister discovery and inked a $42.5 million farm-in deal with adjoining junior Charger Metals

Rio Tinto (ASX:RIO) stands apart among the global supermajors.

While competitors like BHP (ASX:BHP) and Vale have their EV ambitions wedded to old world metals finding new love in an electrifying world, Rio has taken the biggest plunge into trying to produce its own materials of the key battery metal lithium.

For many, like BHP, the market remains too small, too volatile, too immature.

For Rio, and to some extent Glencore, it’s an opportunity to be as close to the vanguard as a cumbersome beast like a multinational can.

Rio Tinto has stayed on the sidelines of manoeuvring around the biggest M&A plays, declining to involve itself in the game to acquire Liontown Resources (ASX:LTR) or Azure Minerals (ASX:AZS), where existing lithium producers like Albemarle, MinRes (ASX:MIN), SQM have duked it out alongside WA mining queen Gina Rinehart.

Instead it’s continued to heap pressure on the Serbian Government to revive its seemingly dead in the water Jadar mine, and tip hundreds of millions into a pilot brine project in Argentina at the Rincon Salar.

Meanwhile, the other place where Rio has been active is in early stage exploration plays.

Rio has pegged a swathe of potential lithium prospects across WA in recent months and piled millions into explorers in the state like Everest Metals Corporation (ASX:EMC) and TSX-listed players in Canada’s James Bay district.

Now it’s proving an early mover in one emerging lithium district in WA where the established players have not piled in … yet.

Rio has swum away from the crowded and Olympic-level swimming up in the Pilbara and Eastern Goldfields to be the adult in the kiddie pool in the nascent Lake Johnston lithium rush.

Rio stakes a claim

Rio’s big move into Lake Johnston, an area east of Norseman best known for Poseidon Nickel’s (ASX:POS) mothballed Maggie Hays and Emily Ann nickel mines and the Lake Johnston plant, comes after a rush in the area started by TG Metals (ASX:TG6) and its Burmeister prospect.

It’s up over 600% YTD, pretty much all of that in the three weeks since it announced shallow drilling had intersected grades of up to 2.28% Li2O in a pegmatite laden soil anomaly at Burmeister.

Rio Tinto has quietly pegged a large exploration lease not far from the find.

Now it has also inked a farm-in deal worth as much as $42.5 million with Charger Metals (ASX:CHR) to fund exploration at the Lake Johnston project, where Charger separately purchased the remaining 30% rights in tenements shared with Lithium Australia (ASX:LIT) in a $2m side deal.

Rio’s exploration arm will pay Charger $500,000 and put another $1.2m into the company before the farm in starts and spend $3m over 12 months.

It can then earn 51% by spending $10m in exploration and making another $1.5m in cash payments, and 75% by sole funding $40m of exploration and completing a DFS, by which point it would have to be a pretty advanced project.

Nearby TG Metals surged, with its shares lifting almost 21% this morning.

Lake Johnston includes the Medcalf spodumene prospect, much of the Mount Day pegmatite field and the Mt Gordon Lithium prospect, which is located adjacent to the Jaegermeister prospect extending into Charger’s tenement.

Rio Tinto boss Jakob Stausholm has previously complained of high equity valuations in lithium that have made larger M&A less appealing, with the share price of market leading producers dropping significantly this year with chemical and spodumene prices losing around three quarters of their spot value since late last year.

Materials sector in nowhere land as week opens

The materials sector was in middle of the road territory, sliding 0.3% with both Rio and BHP in the red.

Gold miners gave up their gains from last Friday, while coal stocks led by Whitehaven (ASX:WHC) were in the green.

Allkem (ASX:AKE) lifted almost 2% after revealing insto State Street Corporation had upped its stake ahead of merger meetings over its tie-up with America’s Livent next month.