Rio Tinto Eyes $4-6 Billion Arcadium Takeover, Bolstering Global Lithium Presence
Rio Tinto, the world's second-largest miner, is eyeing a potential takeover of U.S. lithium producer Arcadium. Both parties confirmed on Monday that discussions are underway regarding the acquisition.
The buyout could be valued at $4-6 billion. Following the announcement, Arcadium's U.S.-traded shares soared by 35% after hours on Friday, while its Australian shares jumped 46% to A$6.09, according to Reuters.
However, Rio said the takeover is still in the consideration stage and the approach was "non-binding," adding that no definitive agreement has been reached yet.
If successful, Rio Tinto's acquisition of Arcadium would propel the company to become one of the top lithium suppliers globally, gaining access to mines and processing plants across four continents, and positioning it among the industry leaders, alongside Albemarle and SQM.
The acquisition bid spotlights the global scramble for lithium dominance, as the growing use of electric vehicles and an international push toward electrification have driven up the demand for the metal.
Blackwattle Investment Partners, an Australian shareholder in Arcadium, has argued that a potential offer of $4-6 billion would substantially undervalue the company.
The global lithium market has faced a downturn following oversupply from China in recent years. As a result, prices for high-grade (99.2%) lithium carbonate have dropped more than 20% since the start of the year, reaching $10,800 per ton, CNBC reported.
Saul Kavonic, head of energy research at MST Marquee, told CNBC that Rio Tinto waited for the lithium downturn to pursue M&A.
"Arcadium has likely been in Rio Tinto's crosshairs for years, but lithium prices and valuations were high for a long time," Kavonic said. "Ultimately, Rio Tinto only wanted to play in the lithium space if they were going to be a top three producer," he added.
Rio Tinto's planned lithium mine in Serbia faced setbacks over environmental concerns. Rio then shifted focus to Arcadium, whose lithium sales volumes are expected to rise by 25% by 2024, primarily due to developments in Argentina.
Rio will be securing a stronger lithium presence by the acquisition, countering Jadar's delays. Rio's current operations would be enhanced by Arcadium's Argentine holdings, helping the company gain a stronger footing in the global lithium market.
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