This can be a {photograph} of a Rio Tinto mining helmet taken on 2 Jun. 2020.
Aaron Bunch | Getty Photographs
The world’s second-largest miner Rio Tinto expressed curiosity in buying U.S. lithium producer Arcadium, the 2 firms confirmed in separate statements on Monday.
No monetary specifics have been disclosed. Rio Tinto stated that there isn’t a certainty that any transaction will probably be agreed to.
Arcadium Lithium’s market worth at the moment stands at $3.31 billion, based on knowledge from LSEG. The corporate’s Australian-listed shares jumped over 42% in early Monday commerce.
If the deal goes via, Rio Tinto would turn into one of many largest suppliers of lithium, trailing solely Albemarle and SQM. Rio would additionally purchase entry to lithium mines and processing crops throughout 4 continents. This transfer comes as mining firms search to safe important minerals for the worldwide power transition.
Lithium costs have been below stress because of Chinese language oversupply. Costs of the benchmark 99.2% lithium carbonate have fallen over 20% year-to-date to $10,800 per metric ton, knowledge from FactSet reveals.
Saul Kavonic, head of power analysis at MST Marquee, instructed CNBC that Rio Tinto had been ready for a lithium downturn with a view to pursue M&A that may ship it a world scale lithium division.
“Arcadium has doubtless been in Rio Tinto’s crosshairs for years, however lithium costs and valuations have been excessive for a very long time,” he stated.
“Finally, Rio Tinto solely needed to play within the lithium area in the event that they have been going to be a high three producer,” he instructed CNBC by way of e-mail, including that the mining big was struggling to attain a tier one lithium publicity via natural means, exploration or smaller scale M&A.
Rio has been encountering vital resistance in Serbia concerning its deliberate Jadar mine, which Rio believed had the potential to be a “world-class lithium-borates asset.” Residents have constantly urged Belgrade to halt the mission over considerations the mining mission might pollute the encircling surroundings.
In Arcadium’s current second-quarter outcomes, the corporate projected a 25% leap in mixed lithium hydroxide and lithium carbonate gross sales volumes for 2024, in comparison with 2023. The corporate additionally asserted its intentions to ramp up manufacturing ranges in its current expansions in Argentina.
“All of it comes right down to what Rio Tinto is keen to pay, and their long run lithium worth outlook,” stated Kavonic, who surmised that Rio would not have approached the deal with out expectations of getting to pay a fabric premium.
Rio Tinto and Arcadium didn’t instantly reply to CNBC’s requests for feedback.
Different lithium shares listed in Australia rallied. Liontown Sources rose 12.84%, Mineral Sources added 4.94%, whereas Pilbara Minerals and IGO traded round 3.11% and three.71% larger, respectively.