Exclusive-Rio Tinto in talks to buy lithium miner Arcadium, sources say

By Ernest Scheyder and Clara Denina

(Reuters) – Rio Tinto has held talks to buy lithium miner Arcadium, three sources with direct knowledge of the negotiations said, a deal that would make Rio the third-largest producer of the metal for electric vehicle batteries.

Arcadium shares rose 36% in extended trading on Friday.

Talks were ongoing and continued in London this week during the LME Week conference, one of the sources said. An offer is expected to come in the near future, according to the second source. The talks are ongoing and may not necessarily lead to a deal, the sources said.

Philadelphia-based Arcadium could be valued at $4 billion to $6 billion or more, the third source said. Neither source was authorized to discuss the negotiations publicly.

The deal would make Rio one of the world’s largest suppliers of the ultralight metal, behind only Albemarle and SQM, as demand is expected to pick up later this decade amid growing use of lithium-ion batteries for electric vehicles and consumer electronics.

The recent slide in lithium prices, which is partly due to oversupply in China, has pushed Arcadium shares down more than 50% since January, making it an attractive takeover target.

It was not immediately clear whether a deal would involve mostly cash, stock or a mix of both. Arcadium has selected two investment banks to handle its negotiations with Rio, according to the second source.

By buying Arcadium, Rio would have access to lithium mines, processing facilities and warehouses on four continents to fuel decades of growth, as well as a customer base that includes Tesla, BMW and General Motors.

Arcadium and Rio Tinto declined to comment.

The Anglo-Australian mining company is already one of the world’s largest producers of copper – used to make wiring, construction equipment, electronics and other devices – as well as iron ore and other metals.

Arcadium has approximately 2,400 employees in nine countries. About 84% of its revenue comes from Asia – the existing global center for lithium demand – giving it potential for growth as electric vehicle projects grow in the Western Hemisphere, particularly those supported by the US Inflation Relief Act.

Rio faces strong opposition in Serbia to its proposed Jadar mine, for which it recently regained its license. Local community members have repeatedly pressured Belgrade to block the project, which has the potential to supply much of Europe’s battery metal needs.

Arcadium believes it is unlikely that Rio will ever be able to develop the Serbian project, the second source said.

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Rio could also benefit from Arcadium’s expertise in direct lithium extraction, a growing segment of the lithium industry that aims to mechanically filter the metal from brine.

No company has commercially launched a DLE process without evaporation ponds, but Arcadium has successfully used DLE since the 1990s with ponds in Argentina, and its engineers are widely regarded as experts worldwide.

Rio paid $825 million in 2022 for a DLE project in Argentina, which has yet to produce the metal.

“THE COMPLETE PACKAGE”

Arcadium was only formed in January through the merger of US-based Livent and Australia-based Allkem, with each company getting an equal number of seats on the company’s 12-person board.

Speculation about a potential relationship between Arcadium and Rio has been floating around for weeks.

“Arcadium offers Rio the full package,” Scotiabank analysts said on Sept. 10, adding that “the case (for a buyout) has strengthened.”

In a presentation to investors on September 19, Arcadium laid out an aggressive growth strategy to triple its adjusted earnings by 2028 by developing its lithium projects around the globe.

Rio’s interest in Arcadium comes amid a growing wave of deal interest in the mining industry, particularly for the essential minerals needed to power the global energy transition.

BHP – the world’s biggest miner – earlier this year made an unsuccessful bid for smaller rival Anglo American. Glencore, BHP and others are seen as potential bidders for other critical minerals projects.

(Reporting by Ernest Scheyder and Clara Denina; Additional reporting by David French and Divya Rajagopal; Editing by Veronica Brown and Deepa Babington)