Rio Tinto (RIO.US) confirms interest in acquiring Arcadium Lithium (ALTM.US), sending its shares up nearly 40% before the market open.

Shares of Arcadium Lithium (ALTM.US) jumped more than 30% before the market opened on Monday after confirming that mining giant Rio Tinto (RIO.US) had approached it regarding a potential acquisition. As of writing, Arcadium was up 38% to $4.26, while Rio Tinto was down 0.34% to $69.46.

Rio Tinto confirmed on Monday that it had made a non-binding offer to acquire Arcadium Lithium. Both companies said in their statements that the discussions may not lead to any transaction, and they will not comment further unless necessary.

Shares of lithium miners, including Arcadium Lithium, rose last Friday after The Australian reported that Rio Tinto was considering a move into the lithium sector.

According to LSEG, Arcadium Lithium's current market capitalization is $3.31 billion. If the deal goes through, Rio Tinto will become one of the largest lithium suppliers, trailing only Albemarle and SQM. The company will also gain access to lithium mines and processing plants across four continents.

Any deal would require Rio Tinto to win support from Arcadium Lithium's board and shareholders. Tim Riordan and Michael Teran, portfolio managers at Blackwattle Investment Partners, wrote in a letter to the board of Arcadium Lithium on Saturday that the potential acquisition would be highly speculative, "requiring a significant premium to achieve a fair valuation of the business."

Lithium is a key component in batteries for electric vehicles as well as personal electronic devices such as laptops and smartphones. Global lithium inventories have been weak since the beginning of this year. The price of the key battery metal has plunged amid a supply glut and tepid demand from electric vehicle manufacturers.

Rio Tinto is looking to strengthen its lithium business and hopes to step up its efforts in lithium mining. The company plans to build Europe's largest lithium mine in Serbia, but has faced resistance from local residents, with CEO Jakob Stausholm describing it as a "well-organized" disinformation campaign.

Saul Kavonic, head of MST Marquee Energy Research, said Rio Tinto has been waiting for a drop in lithium prices to make a deal and build a world-class lithium business. "Arcadium may have been on Rio Tinto's radar for years, but the lithium price and valuation have been high for a long time," he said.