Rio Tinto to Acquire Arcadium Lithium for $6.7bn

Anglo-Australian mining giant expands battery metals portfolio with all-cash deal for lithium producer, aiming to become world's third-largest lithium miner

Rio Tinto, the Anglo-Australian mining corporation, has announced plans to acquire Arcadium Lithium in an all-cash transaction valued at US$6.7 billion. The deal, confirmed on Wednesday, would position Rio Tinto as the world's third-largest lithium miner.

Arcadium Lithium, formed in January through the merger of US-based Livent and Australia's Allkem, is a battery metal producer headquartered in Philadelphia. The company currently has a production capacity of approximately 75,000 tonnes per year of lithium carbonate equivalent (LCE). The transaction is expected to be completed by mid-2025.

Rio Tinto CEO Jakob Stausholm, says: "This is a counter-cyclical expansion aligned with our disciplined capital allocation framework, increasing our exposure to a high-growth, attractive market at the right point in the cycle."

The acquisition would provide Rio Tinto with lithium mines in Argentina and Australia, as well as processing facilities in the US, China, Japan, and the United Kingdom. It would also expand the company's customer base to include major automakers such as Tesla, BMW, and General Motors.

Rio Tinto's strategic move in lithium market

Rio Tinto's decision to acquire Arcadium comes at a time when lithium prices have experienced a significant decline. Lithium carbonate, a key component in electric vehicle (EV) batteries, was priced at US$10,800 per tonne on Wednesday, down from US$22,950 per tonne a year ago.

This price crash has led to the suspension of numerous lithium development projects. However, Rio Tinto views this market downturn as an opportunity to expand its presence in the battery metals sector.

Stausholm adds: "We will bring our scale, development capabilities and financial strength to realise the full potential of its tier-one portfolio."

The acquisition aligns with Rio Tinto's strategy to increase its exposure to materials essential for the global energy transition away from fossil fuels. It complements the company's existing aluminium and copper production capabilities.

BMO Capital Markets, a financial services provider, notes that Arcadium plans to increase its production capacity to around 170,000 tonnes of LCE by 2028/29. This could complement Rio Tinto's proposed 50,000 tonne LCE per year Rincon project in Argentina.

Arcadium's strategic position 

Arcadium Lithium's CEO Paul Graves, says: "This is a compelling cash offer that reflects a full and fair long-term value for our business and de-risks our shareholders' exposure to the execution of our development portfolio and market volatility."

Graves adds: "This transaction will give us the opportunity to accelerate and expand our strategy."

The acquisition of Arcadium would significantly enhance Rio Tinto's position in the lithium market. Over the past six years, the company has been actively expanding its footprint in the battery materials sector.

In 2018, Rio Tinto reportedly attempted to acquire a US$5 billion stake in Sociedad Química y Minera de Chile (SQM), the world's second-largest lithium producer. In 2021, the company began lithium production from waste rock at a demonstration plant located at its borates mine in California.

The following year, Rio Tinto completed the acquisition of the Rincon lithium project in Argentina. This project has reserves of almost two million tonnes of contained LCE, sufficient for a 40-year mine life.