Rio Tinto Ltd (ASX: RIO) shares are most often connected with iron ore.
That's because the industrial metal still provides the majority of revenue for the S&P/ASX 200 Index (ASX: XJO) miner.
Rio Tinto shares also have significant exposure to copper and aluminium.
And over the past two years, the miner has been increasingly active in the lithium space.
According to the company's website:
Lithium is part of our portfolio of materials essential to a low-carbon future. Lithium is a key element needed for low-carbon technologies including the electrification of transport, large-scale batteries and energy storage. Double digit growth in lithium demand is forecast over the next decade.
Image source: Getty Images
What lithium projects does the miner own?
Rio Tinto shares currently have exposure to two large lithium projects.
The ASX 200 miner acquired the Rincon lithium project, located in Argentina, in late 2021 for US$825 million. Rio Tinto is currently developing a small starter battery-grade lithium carbonate plant at the site with a capacity of 3,000 tonnes per year.
The company says the large brine project has the potential to be one of the lowest carbon operations in the industry.
If you own Rio Tinto shares you also own part of the miner's $2.4 billion Jadar lithium-borate project, located in Serbia.
The development of Jadar ran into some difficulties in January 2022, when Serbia's government revoked Rio's licences related to its proposed lithium-borates project.
But Rio Tinto isn't throwing in the towel on Jadar just yet, saying, "Jadar project has the potential to be a world-class asset."
The company notes:
We are focused on consultation with all stakeholders to explore all options related to the project's future.
We are also long-term landowner and have made commitments to the community and suppliers. We will continue to honour our obligations despite our permits and licenses being cancelled.
Here's what UBS is saying about Rio Tinto shares and lithium
According to UBS (courtesy of The Australian), Rio Tinto could benefit if the miner diversifies from iron ore into the "right asset at the right price".
On the lithium front, UBS notes that both Rincon and Jadar are relatively high-risk prospects. Which could see the ASX 200 miner look towards mergers and acquisitions (M&A).
According to UBS:
"[W]e see potential for Rio to look to grow in lithium through M&A (albeit M&A is not without risk either) … Rio recently reiterated that it would remain disciplined with M&A; in our opinion, the market reaction to a potential Li acquisition would depend on the size, valuation, financing, etc.
UBS has a sell rating on Rio Tinto shares with a price target of $95. That's 14% below the current share price of $110.50.
Which ASX lithium shares might Rio Tinto seek to acquire?
No definitive news has emerged on which ASX lithium stocks may eventually merge with Rio Tinto shares. However, The Motley Fool reported on a number of potential prospects back in October, named by anonymous sources.
Pilbara Minerals Ltd (ASX: PLS), IGO Ltd (ASX: IGO), Allkem Ltd (ASX: AKE), Core Lithium Ltd (ASX: CXO), and Liontown Resources Limited (ASX: LTR) were all named as potential takeover targets.
Stay tuned!
