RIO.US to acquire ALT.US sparks lithium frenzy as small lithium miners' shares soar
1min read Rio Tinto's (RIO.US) acquisition of Arcadium Lithium (ALTM.US) has sparked excitement in the lithium market, driving shares of related lithium companies higher. The deal will make Rio Tinto the world's third-largest lithium producer, behind Albemarle and SQM. The acquisition strategy has also fueled optimism that smaller lithium producers could be acquisition targets, driving shares of Liontown Resources Ltd., Sayona Mining Ltd and Lithium Americas (LAC.US) up more than 10%, while the Global X Lithium & Battery Tech ETF rose more than 5% in New York.
Analyst Pavel Molchanov of Raymond James & Associates Inc. noted that the depressed lithium price had led to lower corporate valuations, increasing interest from potential buyers. He stressed that a large mining group's interest in a multi-billion dollar acquisition was a positive signal for the entire lithium industry.
Rio Tinto has been seeking to expand its lithium mining operations, particularly after the Serbian government blocked its Jadar mine (which was expected to be one of the world's largest lithium mines) indefinitely following opposition.
However, Arcadium has significant lithium reserves across four continents, focusing on lithium rather than other products such as fertilizers, making it an attractive acquisition target for Rio Tinto. Rio Tinto's large balance sheet will help to develop these lithium assets in a timely manner to meet the expected growth in global demand over the next decade.
Through the acquisition of Arcadium, Rio Tinto will gain lithium mines, processing facilities and deposits in Argentina, Australia, Canada and the US, driving its growth for decades and expanding its customer base, which includes Tesla, Ford, BMW and General Motors.
Analysts at Canaccord also expect the combined group to account for roughly 10% of global lithium chemical supply by 2030.
Despite the lack of financial details, Arcadium's shares have fallen more than 50% since January, mainly due to a lithium inventory crunch caused by a supply glut and weak demand for key battery metals in electric vehicles. China's spot lithium carbonate prices have fallen more than 85% from their 2022 peak.
On Monday, Arcadium's shares in Australia jumped 46%, while its US-listed shares soared 35%, while Rio Tinto's shares fell 2%.
