Rio Tinto has announced a $6.7 billion (A$9.975 billion, £5.1 billion) acquisition of US-based Arcadium Lithium, expanding its role in the global lithium supply chain despite current headwinds in the global electric vehicle (EV) market.
The deal will position the Anglo-Australian mining giant as one of the world's largest lithium producers, alongside Albemarle and SQM.
The acquisition, at $5.85 per share, represents an almost 90% premium on Arcadium’s closing price of $3.08 on October 3, just before reports of the potential deal surfaced.
This move will give Rio Tinto access to a broad portfolio of lithium mines, processing facilities, and deposits across Argentina, Australia, Canada, and the US.
These assets are expected to play a crucial role in supplying the growing demand for EV batteries, with a customer base that includes automotive giants like Tesla, BMW, and General Motors.
Despite slowing EV sales and falling lithium prices driven by oversupply from China, Rio Tinto remains optimistic about the long-term prospects of the lithium market.
This optimism is evident as several car manufacturers, such as Toyota, Ford, and Volvo, have delayed their transition to electric vehicles.
In the UK, the Society of Motor Manufacturers and Traders (SMMT) reported that EV registrations in September grew by only 3.7% year-on-year, compared to a 17.2% rise in diesel vehicle registrations.
Rio Tinto’s CEO, Jakob Stausholm, described the acquisition as a "countercyclical expansion", aligning with the company's capital allocation strategy.
“Acquiring Arcadium Lithium is a significant step forward in Rio Tinto’s long-term strategy, creating a world-class lithium business alongside our leading aluminium and copper operations to supply materials needed for the energy transition,” Stausholm said.
“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.
"We look forward to building on Arcadium Lithium’s contributions to the countries and communities where it operates, drawing on the strong presence we already have in these regions.
"Our team has deep conviction in the long-term value that combining our offerings will deliver to all stakeholders.”
Peter Coleman, the chair of Arcadium, highlighted that the cash offer would provide shareholders with “certainty and liquidity,” shielding them from the inherent risks and fluctuations in the lithium market.
Arcadium’s share price had dropped more than 37% since the start of the year, valuing the company at $4.56 billion before the deal was announced.
The deal has been unanimously approved by both companies' boards and is expected to close by mid-2025, positioning Rio Tinto to take a leading role in the lithium market, essential for the global energy transition.