Arcadium Lithium's Q3 Results Amid Rio Tinto Acquisition

Arcadium Lithium, a global leader in lithium chemicals production, recently reported its third-quarter results amidst its acquisition by mining giant Rio Tinto. The acquisition, announced in October 2024, has significant implications for both companies and the broader lithium market.
Arcadium Lithium's Q3 Results Arcadium Lithium's Q3 results, released in November 2024, highlighted the company's resilience in a challenging market. Despite lower average realized prices and volumes, the company maintained a strong adjusted EBITDA of $42.9 million. The decline in Adjusted EBITDA compared to the second quarter was attributable to lower average realized prices and lower volumes, in addition to higher costs.
The company realized average pricing of $16,200 per product metric ton for combined lithium hydroxide and carbonate volumes in the third quarter, compared to $17,200 in the second quarter. Average realized pricing declined across most lithium products due to weaker market prices and customer and product mix. However, lithium hydroxide pricing was roughly flat quarter over quarter, supported by existing long-term commercial agreements.
Total volumes were 6% lower on an LCE3 basis than the second quarter, with higher spodumene volumes more than offset by lower hydroxide and carbonate volumes. This was largely a result of weaker overall demand in the quarter, as well as a slow production ramp-up of the Olaroz Stage 2 lithium carbonate expansion in Argentina.

Rio Tinto Acquisition The pending acquisition by Rio Tinto led Arcadium Lithium to withdraw its operating and financial guidance, as is customary during such transactions. This move, announced on October 9, 2024, was a result of the definitive agreement under which Rio Tinto will acquire Arcadium Lithium in an all-cash transaction for US$5.85 per share. The Transaction Agreement valued Arcadium Lithium's diluted share capital at approximately $6.7 billion, representing a 90% premium to Arcadium's closing price of $3.08 per share on October 4, 2024.
The acquisition, expected to close in mid-2025, subject to shareholder and regulatory approvals, has been unanimously approved by both companies' boards of directors. The withdrawal of guidance may have contributed to a shift in investor sentiment, focusing more on the strategic implications of the acquisition rather than short-term financial performance.

Strategic Implications and Growth Prospects The acquisition of Arcadium Lithium by Rio Tinto in October 2024 significantly enhanced the strategic positioning and growth prospects of both companies. Arcadium, a global leader in lithium chemicals production, gained access to Rio Tinto's scale, development capabilities, and financial strength, enabling it to realize the full potential of its Tier 1 lithium portfolio. This combination created a world-leading lithium business, making Rio Tinto one of the largest lithium producers globally on a pro-forma basis (Rio Tinto, 2024).
The acquisition also brought complementary capabilities, with Rio Tinto's balance sheet strength and proven project delivery capability accelerating the growth of Arcadium Lithium's Tier 1 resource base. Additionally, the transaction positioned Rio Tinto to become a market leader in lithium processing by combining its technological leadership with Arcadium's commercial excellence. For shareholders, the acquisition represented a premium of 90% to Arcadium's closing price on October 4, 2024, valuing its diluted share capital at approximately $6.7 billion (Arcadium Lithium, 2024). This cash offer reflected a full and fair long-term value for Arcadium Lithium's business and de-risked shareholders' exposure to market volatility.
Stakeholders, including customers, employees, and communities, also benefited from the transaction, as it provided opportunities to accelerate and expand Arcadium Lithium's strategy, ensuring reliable, low-cost lithium supplies for customers and creating new job opportunities and economic growth in the regions where the companies operate.

Conclusion Arcadium Lithium's Q3 results, released amidst its acquisition by Rio Tinto, highlighted the company's focus on cost discipline and strategic expansion. Despite lower average realized prices and volumes, the company maintained a strong adjusted EBITDA and emphasized its commitment to cost-saving initiatives and the advancement of expansion projects, such as Sal de Vida and Nemaska Lithium. The acquisition by Rio Tinto brought significant scale, development capabilities, and financial strength to Arcadium Lithium, enhancing its strategic positioning and growth prospects. The combination of these two industry leaders created a world-leading lithium business, with clear benefits for shareholders and stakeholders alike. As the energy transition continues to gain momentum, the combined strength of Arcadium Lithium and Rio Tinto positions them well to capitalize on the growing demand for lithium and other energy transition commodities.