Rio Tinto buys Arcadium Lithium for $6.7bn

Rio Tinto has struck a $6.7 billion deal for a lithium miner that would make it the world’s third-largest producer of the key ingredient of electric vehicle batteries.
The London-listed miner is paying $5.85 a share in cash, a 90 per cent premium to Arcadium Lithium’s closing price of $3.08 a share on October 4 before the companies revealed they were in takeover talks.
Buying Arcadium gives Rio access to lithium mines, processing facilities and deposits in Argentina, Australia, Canada and the United States, and to a customer base that includes Tesla, BMW and General Motors. Arcadium has 2,400 employees and was formed via the merger of Livent, an American lithium technology specialist and Australia-based Allkem.
A sharp drop in lithium prices, due in part to oversupply by China and falling demand for new electric vehicles, had resulted in a 39 per cent fall in Arcadium shares since the start of the year. This had left the company vulnerable to a takeover.
Jakob Stausholm, Rio’s chief executive, said although the outlook for lithium prices was difficult to predict over the next couple of years, demand was expected to grow at a compound annual rate of 10 per cent until 2040, leading to a supply deficit.
The deal would allow Rio to increase its exposure “to a high-growth, attractive market at the right point in the cycle”, Stausholm said.
Paul Graves, Arcadium Lithium’s chief executive, said the offer was “compelling”, and that it “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”.
Rio has two lithium projects, Rincon in Argentina and Jadar in Serbia, but neither has a date for production to start. Jadar has been beset by delays amid environmental protests. Annual output for both mines is expected to be about 58,000 tonnes a year.
Arcadium produced 20,100 tonnes of lithium hydroxide and carbonate during the first six months of the year and 53,500 tonnes of spodumene concentrate, a key source of lithium.
The $6.7 billion offered is more than the $4.6 billion that had been expected by analysts at RBC Capital when the approach was confirmed on Monday.
However, Blackwattle Investment Partners, a shareholder in Arcadium, has hit back at the offer as “opportunistic”, given the company’s assets were “not easily replicable”. The Australian investment management company said it would vote against the deal in its current form, insisting that a fair price should be closer to $8 billion.
Stausholm, 56, denied the bid was opportunistic and said that investors had already “voted with their feet” in selling down the shares ahead of the group’s bid emerging.
Arcadium is expected to account for about 5 per cent of Rio’s total projected capital expenditure of up to $10 billion across 2025 and 2026.
Stausholm confirmed that the company remained committed to the existing dividend policy, to pay out between 40 and 60 per cent of earnings to shareholders.
Several miners have been looking for deals to secure the metals needed for the transition to low-carbon energy sources. In May, BHP made a failed £39 billion bid for Anglo American in an attempt to gain access to copper, which is used in green technologies including electric vehicles, wind turbines and energy networks.
The copper market remained attractive, Stausholm said, but the large premiums attached to the assets remained “a problem” in terms of making acquisitions.
Arcadium’s New York-listed shares opened 116 cents, or almost 38 per cent, higher at 424 cents. Rio shares were trading 45½p, or 0.9 per cent, lower at £49.99 in early afternoon trading in London.