*

Rio Tinto secures ENAMI's Altoandinos project and

Codelco's

Maricunga project

*

Rio's DLE expertise from Argentina gives it competitive

edge in

Chile Maricunga

*

Construction of Maricunga likely to start in 3-5 years

after

permit updates

(This story originally published on May 21 was updated on May

22 after Rio Tinto was selected for a second lithium project in

Chile.)

By Daina Beth Solomon and Clara Denina

SANTIAGO, May 22 (Reuters) - Global miner Rio Tinto

will tackle one of the biggest technological

challenges in the lithium industry as it takes the lead in

Chile's first major projects involving the battery metal in

years, alongside state-run mining companies Codelco and ENAMI.

Codelco's Maricunga project and ENAMI's Altoandinos project

represent a new pivot in Rio's lithium ambitions and a turning

point for Chile, which for many years had only two companies -

Chile's SQM and U.S.-based Albemarle -

extracting the metal that powers electric vehicles.

Rio will spearhead the operational side of both projects,

with nearly 50% ownership at Maricunga and 51% at Altoandinos.

The plans came the same week that Rio announced on Thursday

the surprise departure of its CEO Jakob Stausholm, who led the

miner's big bets on lithium, later this year.

As Rio raises its profile in lithium, a major challenge will

be deploying new technology, called direct lithium extraction,

or DLE, to separate the ultralight metal from salty brine

liquid. It is meant to be more environmentally friendly and

efficient than conventional methods, industry experts say, but

has yet to be proven widely in the industry and has never been

used in Chile at commercial scale.

The technical challenge comes against a backdrop of

uncertainty for lithium prices, which have fallen nearly 90%

since late 2022 due to oversupply and weak demand for EVs.

"Scaling it in line with global demand timelines remains

uncertain," said Nicole Porcile, a partner at mining consulting

firm Anagea. "The ability to deliver at scale, efficiently and

reliably will be a decisive factor in the project's

competitiveness and investor confidence."

Rio has a DLE pilot plant at its Rincon project in

Argentina, and recently acquired U.S.-based Arcadium, which

employs a mix of DLE and traditional extraction methods.

That DLE know-how gave Rio an edge over three final

competitors to partner with copper giant Codelco, said a person

familiar with the Maricunga deal. Still, Rio and Codelco must

now hammer out which kind of DLE will work sustainably and

effectively at Maricunga, one of the world's most lithium-rich

salt flats.

"That's certainly the goal: to develop and operate this in

the most environmentally friendly manner possible because

Codelco is well aware that they'll be under the microscope," the

person said.

Codelco's search for a Maricunga investor attracted Middle

Eastern, Chinese and Western companies, the person added,

speaking on condition of anonymity because the talks were

private. Construction is expected to start in three to five

years, once environmental permits are updated.

Codelco has proposed a gradual transition to DLE, but Rio

Tinto is aiming to use DLE from the start, with lower costs

relative to other DLE projects, said a second person familiar

with the matter.

ARGENTINA EXPERIENCE

Rio told Reuters its Argentina experience provided strong

footing for future projects.

"We are therefore confident in the application of our

technology to Maricunga and potentially to other lithium salt

flats in Chile," a spokesperson said.

Rio will spend up to $900 million at Maricunga, and lead

design, construction, operation and sales. At Altoandinos, it

plans to initially contribute $425 million to the project to

fund studies required before a final investment decision.

Rio is the only major mining company to bet heavily on

lithium, accelerating its push with a second deal in six months

at a time of low market prices.

"We have not heard from investors that they want to see

further investment in lithium," RBC Capital Markets said in a

note.

Codelco hired investment bank Rothschild to scout for

candidates for the Maricunga project. And at the same time, it

is set to soon close a deal to partner with Chile's SQM at the

Atacama salt flat.

Benchmark Minerals analyst Federico Gay noted that Rio and

Codelco will have to carefully prioritize. "Too many fronts

(are) open for both companies, in a moment when justifying large

investments for lithium is challenging."

Rio, which could be granted an intellectual property permit

if its DLE technology is used for the project, will hold a

majority of seats on a technical committee with Codelco, and

will move to a 50-50 split once production begins, according to

a filing with Chile's financial regulator.

ENAMI ran its own selection process separately,

attracting bids from Chinese electric vehicle maker BYD

, French miner Eramet, and South Korean

steel group Posco, as well as financing proposals

from China's CNGR Advanced Material Co Ltd and South

Korea's LG Energy Solution.