EM LATAM CREDIT: Govt. Approves Rio Tinto Lithium Mining Project: Positive Take
Republic of Argentina (ARGENT; Caa3 pos /CCC /CCC+)
• Large scale investments in monetizing Argentina’s vast natural resources will be a major source of hard currency in the years to come. Lithium is a valuable commodity used in electric car batteries and for electricity storage from large scale renewable energy power plants.
• Capital controls have been oft cited as an impediment to increased investment but now that most of those capital controls have been lifted, we should see more companies take advantage of government incentives to invest.
• Multi-national mining company Rio Tinto will take advantage of a government program called RIGI (Régimen de Incentivo para Grandes Inversiones) that promotes large-scale investment by offering less restrictive FX policies, tax advantages and international dispute resolution.
• This is the first mining project approved for RIGI treatment as previously it had been mostly energy projects, primarily related to the Vaca Muerta shale drilling region.
• There are several other mining projects awaiting approval, but government officials have said the RIGI program is to incentivize proposals for new projects and not merely help expand existing ones.
• Argentina is part of a region known as the Lithium Triangle along with Chile and Bolivia that has some of the largest lithium reserves in the world.
• Rio Tinto bought Rincon Mining in 2022 for USD825mn to test commercial development on a relatively small-scale production capacity of 3,000 tons annually and in December 2024 announced plans to scale that up to 53,000 tons annually with the planned benefits of RIGI and the country’s economic reforms in general.
• Rio Tinto has also made lithium investments in Chile, announcing recently a partnership with Chile’s government owned mining company Codelco for a 49% stake in the Maricunga project.
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US TSY OPTIONS: Jun'25 10Y Ratio Put Spread
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