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 corporations confirmed in separate statements on Monday.
No monetary specifics had been disclosed. Rio Tinto mentioned that there isn’t a certainty that any transaction shall be agreed to.
Arcadium Lithium’s market worth at present stands at $3.31 billion, in line with knowledge from LSEG. The corporate’s Australian-listed shares jumped over 42% in early Monday commerce.
If the deal goes by, 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 vegetation throughout 4 continents. This transfer comes as mining corporations 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 exhibits.
Saul Kavonic, head of power analysis at MST Marquee, instructed CNBC that Rio Tinto had been ready for a lithium downturn to be able to pursue M&A that may ship it a world scale lithium division.
“Arcadium has likely been in Rio Tinto’s crosshairs for years, but lithium prices and valuations were high for a long time,” he mentioned.
“Ultimately, Rio Tinto only wanted to play in the lithium space if they were going to be a top three producer,” he instructed CNBC by way of e mail, including that the mining large was struggling to attain a tier one lithium publicity by natural means, exploration or smaller scale M&A.
Rio has been encountering vital resistance in Serbia relating to 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 challenge over issues the mining challenge might pollute the encompassing atmosphere.
In Arcadium’s latest second-quarter outcomes, the corporate projected a 25% soar 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 latest expansions in Argentina.
“It all comes down to what Rio Tinto is willing to pay, and their long term lithium price outlook,” mentioned 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.
