Rio Tinto in Talks to Acquire Arcadium Lithium — 2nd Update

By Rhiannon Hoyle

Mining giant Rio Tinto is in talks to buy New York-listed lithium producer Arcadium Lithium, its latest attempt to establish a foothold in the fast-growing market for a critical mineral used to power electric cars.

Rio Tinto wants to reshape its business to produce more of the metals it expects will be in demand amid huge growth in clean-energy technologies globally. Today, the world's second-biggest miner by market value relies on steel ingredient iron ore for the bulk of its profits.

Lithium has been one of Rio Tinto's priorities for growth, with the miner forecasting demand will surge in the decade ahead because of lithium's role not only in electric vehicles but for giant batteries that can release electricity into the power grid when customers need it.

But branching out into the battery metal hasn't been easy. Plans to build a giant lithium mine in Serbia have faced setbacks from community opposition and suspected Russian disinformation.

Chief Executive Jakob Stausholm last year signaled Rio Tinto was interested in acquiring more lithium assets, but said he was mindful of paying too much for an acquisition.

Arcadium Lithium, formed in January by the merger of Philadelphia-based Livent and Australia's Allkem, has a market value of roughly $3 billion. It owns mining operations in Argentina and Australia, and processing facilities in the U.S., China, Japan and the U.K.

A successful takeover of the company would immediately catapult Rio Tinto into the ranks of the world's top lithium producers.

Once a tiny market largely ignored by commodities traders, lithium has experienced rapid growth in recent years as automakers such as Tesla increased EV sales.

Many forecasters expect the lithium market to keep growing rapidly as the world shifts to low-carbon energy. According to the International Energy Agency, achieving the goals of the Paris climate agreement would boost lithium demand eightfold by 2040. The U.S. has designated lithium as a critical mineral.

Still, the race to build up supply chains of mines and processing facilities has tanked prices, unwinding a two-year boom that took the commodity to record highs and fueled a string of new investments.

In separate statements, Rio Tinto and Arcadium Lithium said there is no guarantee a deal will be agreed. The companies didn't provide any financial details and declined to comment further.

Mining companies have regained an appetite for dealmaking in recent times as investment in the energy transition, spurred by programs such as the Inflation Reduction Act in the U.S., has fed demand for industrial metal copper and critical minerals such as lithium. The value of pending and completed deals announced in the first eight months of this year has only been bettered once since 2012.

Rio Tinto, which has a market value of nearly $120 billion, acquired a lithium project called Rincon in Argentina for $825 million in early 2022. A small, so-called starter plant it is building there will cost more than double an initial estimate because of searing inflation and changes to the project design. The miner is studying options for a full-scale operation.

In Serbia, its Jadar project promises to be a significant asset but faces ongoing challenges.

The project was previously halted in 2022 when the Serbian government revoked its licenses after months of protests and the opposition made it a key issue in the last presidential election. Serbia's government endorsed the project in July when it signed a strategic partnership on critical minerals with the European Union, but it still requires various approvals.

Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com

(END) Dow Jones Newswires

October 06, 2024 21:02 ET (01:02 GMT)

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