Rio Tinto (ASX, LON, NYSE: RIO) (ASX: LTM)(NYSE: ALTM), in an all-cash transaction, valuing the latter at $6.7 billion, the Anglo-Australian giant confirmed on Wednesday. 聽
The second largest miner is paying the United States-based lithium producer $5.85 per share, it said. The deal represents a premium of 90% to Arcadium鈥檚 closing price of $3.08 per share on October 4.聽
The move would position Rio Tinto as one of the world鈥檚 largest lithium miners, behind only US-based Albemarle聽(NYSE: ALB) and Chile鈥檚 SQM (NYSE: SQM).
The acquisition would hand Rio lithium mines in Argentina and Australia, as well as processing facilities in the US, China, Japan and the UK. Its customer base would include major names, such as Tesla, BMW聽and General Motors.
Deal would hand Rio Tinto lithium mines in Argentina and Australia, as well as processing facilities in the US, China, Japan and the UK.
Arcadium was created in January from the merger of Philadelphia-based Livent and Australia鈥檚 Allkem. Its shares have fallen since, dragged by declining lithium prices, which in turn is a result of weaker demand from electric vehicle (EV) makers and聽Chinese oversupply.
Ahead of the confirmation of the deal BMO Capital Markets analyst, Joel Jackson, noted a potential takeover has been part of market rumours for years. 鈥淢any investors believe that Arcadium聽(i.e., the Allkem/Livent merger) was completed to shake out interest from suitors like Rio,鈥� he wrote.
The transaction value is ahead of market expectations which was pegged in the $4 billion to $6 billion range. 鈥淚n our view, this [range] would value Arcadium more like a mining company than a specialty chemicals firm, assuming a mid-cycle price range of $18,000鈥�$19,000 per tonne of lithium聽carbonate equivalent (LCE), average selling price (ASP),鈥� noted Jackson
Before the official announcement industry participants were supportive of the deal. Vulcan Energy鈥檚 (ASX: VUL) founder and executive chair, Francis Wedin, said the company views the development聽as聽a favourable one for the broader lithium market, particularly because it聽shines a spotlight on聽Adsorption-type DLE聽(A-DLE)聽production,聽used by Arcadium聽since 1996 next door to Rio鈥檚 own A-DLE project in Rincon.聽
鈥淭he fact that Rio is joining Exxon and Equinor by focusing on A-DLE is a further indication of how the third wave of lithium鈥檚 growth is developing,鈥� he said in an emailed statement.聽
Battery ambitions
Over the past six years, Rio has been expanding its footprint聽in聽the battery market.聽In 2018, it reportedly聽, the world鈥檚 second largest lithium producer.聽
In April 2021, the world鈥檚 second largest miner聽kicked off lithium production聽from waste rock聽at a聽demonstration聽plant located at a聽borates聽mine it controls in California.聽
Rio took another key step into the lithium market in 2022,聽completing the acquisition聽of the Rincon lithium project in Argentina, which has reserves of almost two million tonnes of contained lithium carbonate equivalent, sufficient for a 40-year mine life.聽
The company plans to develop a battery-grade lithium carbonate plant at Rincon with an annual capacity of 3,000 tonnes and has聽earmarked $350 million聽to invest in the project, with first production expected later this year.
It is also trying to revive one of its biggest lithium projects, the proposed $2.4 billion Jadar聽mine in Serbia. Rio had its mining licence revoked in 2022, following聽widespread protests聽against the proposed mine on environmental concerns.
The mining giant won a small, but key battle in July, as Serbia聽reinstated Rio Tinto鈥檚 licence聽to develop it, but the company will have to secure approvals to move towards production at the site. On Monday, however, the country鈥檚 parliament began debating a proposal to ban lithium and borate mining and exploration. If passed into a law, this would effectively put an end to the contested Jadar聽project.
With projected production of 58,000 tonnes of refined battery-grade lithium carbonate per year, Jadar would be聽Europe鈥檚 biggest lithium mine.
The operation could supply enough lithium to power one million electric vehicles and meet 90% of Europe鈥檚 current lithium needs.
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