Rio Tinto has confirmed it approached battery metals miner Arcadium Lithium over a potential acquisition, as lithium prices hover at a cyclical low.
Rio Tinto has confirmed it approached battery metals miner Arcadium Lithium over a potential acquisition, as lithium prices hover at a cyclical low.
Both Rio and dual-listed Arcadium confirmed the non-binding approach but stressed there was no certainty a transaction would be agreed to or proceed.
Arcadium has a market capitalisation of $4.45 billion, with its shares having slumped more than 60 per cent over the past year against weak market conditions.
Off the back of the news this morning, the miner’s share price skyrocketed more than 40 per cent to $6 apiece. Rio’s shares were down 1.3 per cent to $122 each.
“Rio Tinto today confirmed that it has made an approach to Arcadium Lithium regarding a potential acquisition of Arcadium Lithium by Rio Tinto,” the miner told the ASX.
“The approach is non-binding and there is no certainty that any transaction will be agreed to or will proceed.”
ASX and NYSE-listed Arcadium released a similar statement and added that it remained focus on executing its strategic vision and pathway to significant growth.
Rio’s approach ends months of speculation that the miner was readying to make an M&A move in lithium, with Albemarle floated as the other potential target.
In terms of synergies, Rio and Arcadium both own assets in the “lithium triangle” of Argentina. Rio owns the undeveloped Rincon lithium-brine asset.
Yesterday, Blackwattle Investment Partners, as a shareholder in Arcadium, wrote to the target's board calling a potential acquisition "highly opportunistic".
In its letter, Blackwattle said a deal priced between US$4 billion and US$6 billion would significantly undervalue Arcadium. Instead, it said the price should be close to US$8 billion ($AUD11.8 billion).
"Global lithium markets appear to have bottomed out, with lithium chemical indices stabilising, and in our opinion the timing of this potential sale could not be at a more value destructive period for shareholders," it wrote.
The mining giant’s chief Jakob Stausholm has previously stated the miner is taking a longer-term view of lithium, pointing to demand forecasts over the next decade or two.
Arcadium was formed through the $16 billion merger of Allkem and Livent Corporation. It’s chaired by ex-Woodside Energy chief executive Peter Coleman.
Last month, Arcadium announced it would be mothballing its Mt Cattlin lithium mine north of Ravensthorpe from mid-2025 due to depressed prices.
That marked the latest blow in a string of battery metals operation scale backs and closures due to the continued slump in nickel and spodumene prices, with the latter down to $US790 a tonne.