Rio Tinto announced this Wednesday the purchase of North American Arcadium Lithium for US$6.7 billion. The deal will see the company become one of the largest lithium miners in the world.
The company said it will pay $5.85 per share in cash for the lithium miner, a premium of nearly 90% to Arcadium’s closing price of $3.08 per share on Oct. 3.
Rio will gain access to lithium mines, processing facilities and deposits in Argentina, Australia, Canada and the United States with enough reserves for decades of growth, as well as a customer base that includes automakers Tesla, BMW and General Motors.
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Lithium prices have fallen due to oversupply in China and slowing sales of electric vehicles, making the metal’s miners emerge as attractive acquisition targets.
The market slump prompted Rio to act, Chief Executive Jakob Stausholm told Reuters, seeing the decline in commodity prices as an opportunity to acquire high-quality assets at the right price.
“We really want lithium for batteries, meaning processing as well. And then, of course, we like to be an operator, and if you consider these criteria, you will get to Arcadium quickly,” he said.
“The way you have to think about it is a kind of reverse takeover. It’s not about cutting costs. It’s a case of faster and better construction,” he added.
On top of lithium
The deal will make Rio Tinto one of the largest producers of the metal for battery manufacturing, alongside Albemarle and SQM.
Arcadium Chairman Peter Coleman said Rio will be able to bring its execution experience and strong balance sheet to help develop Arcadium’s assets.
“They don’t have capital constraints… For us, we know that the growth plans are still dependent on an improvement in price over the next two or three years, which is a pretty significant improvement from where we are now,” he said to Reuters.
Rio intends to transfer its existing lithium assets into the new business to ensure growth and retain the Arcadium team. “Rio has indicated that it is very interested in maintaining its experience,” he added.
Energized balance
Arcadium’s combination of active mines, decades-old lithium deposits and some of the industry’s most advanced processing facilities will complement Rio’s production of copper, iron ore and other critical minerals and help the Anglo-Australian mining giant expand your presence.
Rio’s balance sheet could easily finance growth without burdening the mining company’s existing operations, investors and analysts said.
Jason Beddow, managing director at Australian fund manager Argo Investments, which owns shares in Rio, said the deal made a lot of sense. “Yes, it is a big premium (for Arcadium shares), but the shares were sold a lot,” he said.
The transaction, which was unanimously approved by the companies’ boards, is expected to close in mid-2025.
(Reporting by Clara Denina and Melanie Burton from London and Melbourne)
