Rio Tinto (RIO, Financial) has announced its acquisition of Arcadium Lithium (ALTM), stirring excitement in the lithium industry and causing stock prices of related companies to surge. This strategic move positions Rio Tinto as the world's third-largest lithium producer, following Albemarle and SQM.
The acquisition has fueled speculation that smaller lithium producers may become targets for similar deals, leading to stock price increases exceeding 10% for companies such as Liontown Resources Ltd., Sayona Mining Ltd., and Lithium Americas (LAC). Additionally, the Global X Lithium & Battery Tech ETF saw its stock rise over 5% in New York.
Analysts at Raymond James & Associates Inc. noted that low lithium prices have decreased company valuations, making them more attractive to potential buyers. A major mining group’s interest in a multi-billion-dollar acquisition signals a positive outlook for the entire lithium sector.
Rio Tinto aims to expand its lithium mining operations, especially after its Jadar mine in Serbia was indefinitely halted due to governmental opposition. Arcadium, with its vast lithium reserves across four continents and focus solely on lithium, was an appealing acquisition target for Rio Tinto.
By acquiring Arcadium, Rio Tinto will gain access to lithium mines, processing facilities, and deposits in Argentina, Australia, Canada, and the U.S. This move is anticipated to support Rio Tinto's growth for decades and expand its client base, which includes Tesla, Ford, BMW, and General Motors.
Canaccord analysts predict that by 2030, the merged entity could command about 10% of the global lithium chemicals supply. While financial details of the deal remain undisclosed, Arcadium's stock has dropped over 50% since January due to an oversupply and weak demand for key EV battery metals, with China's spot lithium carbonate prices falling more than 85% from their 2022 peak.
On Monday, Arcadium’s stock soared 46% in Australia and 35% in the U.S., while Rio Tinto’s stock dipped by 2%.
