Rio Tinto has closed the purchase of Arcadium Lithium for approximately $6.7 billion – in an all-cash transaction that will transform the world’s largest iron ore producer into the third largest lithium producer in the world.
The Anglo-Australian mining company agreed to pay $5.95 per share of Arcadium, a 90% premium over the closing price on October 4 and a 39% premium over the weighted average price since Arcadium went public on January 4 of this year.
According to Reuters, the acquisition will increase Rio Tinto’s annual lithium production capacity from 108,000 tons to 373,000.
Arcadium, based in the United States, was formed from the merger of American company Livent with Australian company Allkem. It is a vertically integrated company involved in lithium exploration and production of its derivatives such as lithium carbonate and lithium hydroxide.
It has operations in various countries, with mining activities in Argentina, Australia, and Canada, and processing facilities in countries like China, the US, Japan, and the UK.
For the Anglo-Australian giant, this investment is part of its diversification strategy and reducing dependence on iron ore. Its iron ore projects have faced obstacles, and with this acquisition, this business area will instantly gain scale.
Lithium is an essential metal in technological transition and the green economy, used in computing, solar energy, and battery storage.
Currently, there is an oversupply of lithium in the markets – but for Rio Tinto, the metal fits into a long-term strategy focusing on essential materials in the energy transition, particularly in electric vehicle manufacturing.
Rio Tinto took advantage of the current low lithium prices – which are 80% below historical highs – to close the deal. In May, when negotiations began, Arcadium’s valuation was over $10 billion.
“We believe in the future demand for lithium,” Rio Tinto CEO Jakob Stausholm told the Wall Street Journal. “Some time ago, we thought it was too expensive. When prices started falling this year, we put a team together to analyze all possible projects around the world.”
Currently, the two largest lithium producers are American company Albemarle and Chilean company Sociedad Química y Minera (SQM).
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Arwen Volkov, A graduate of the University of St. Gallen in Switzerland with a degree in International Finance, Arwen specializes in sustainable finance and green investments. She began her career at an investment bank in London, where she developed financing models for environmentally friendly projects. Known for her analytical and strategic thinking skills, Arwen is a sought-after financial consultant. In her spare time, she mentors fintech startups, contributing to their growth strategies. She is also a nature enthusiast and an amateur photographer.
