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

Antimony Resources

04/10/2024 21:11

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      Arcadium could be valued between $4 billion-$6 billion or
higher
    

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      Talks have been ongoing and continued in London this week-
sources
    

  
    By Ernest Scheyder and Clara Denina
       Oct 4 (Reuters) - Rio Tinto  RIO.L  RIO.AX  has been
holding talks to buy lithium miner Arcadium  ALTM.N , three
sources with direct knowledge of the negotiations said, a deal
that would make Rio the third-largest producer of the electric
vehicle battery metal.
    Talks have been 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. Talks are ongoing and may not necessarily result
in a deal, the sources said.
    Philadelphia-based Arcadium could be valued between $4
billion to $6 billion or higher, the third source said. None of
the sources were authorized to discuss the negotiations
publicly.
    The deal would vault Rio into one of the world's largest
suppliers of the ultralight metal, behind only Albemarle  ALB.N 
and SQM  SQMA.SN , just as demand is expected to surge later
this decade amid growing use of lithium-ion batteries for EVs
and consumer electronics. 
    The recent slump in lithium prices, which is due in part to
Chinese oversupply, has pushed Arcadium's shares down more than
50% since January, making it an attractive takeover target.
    It was not immediately clear if a transaction would
primarily include cash, stock or a mixture of both. Arcadium has
selected two investment banks to handle its negotiations with
Rio, according to the second source. 
    By buying Arcadium, Rio would gain access to lithium mines,
processing facilities and deposits across four continents to
fuel decades of growth, as well as a customer base that includes
Tesla  TSLA.O , BMW  BMWG.DE  and General Motors  GM.N . 
    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 around 2,400 employees across nine countries.
Roughly 84% of its revenue comes from Asia - the existing global
center for lithium demand - giving it growth potential as EV
projects ramp up across the Western Hemisphere, especially those
supported by the U.S. Inflation Reduction 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
needs of the battery metal. 
    Arcadium believes it is unlikely Rio will ever be able to
develop the Serbian project, the second source said. 
    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 brines. 
    No company has commercially launched a DLE process without
evaporation ponds, but Arcadium has successfully been using DLE
since the 1990s with ponds in Argentina and its engineers are
widely seen as global experts.
    Rio paid $825 million in 2022 for a DLE project in Argentina
that has yet to produce the metal.
    
    'THE FULL PACKAGE'
    Arcadium was formed only in January by the merger of
U.S.-based Livent and Australia-based Allkem, with each company
getting an equal number of slots on the company's 12-person
board of directors.
        Speculation of a potential tie-up between Arcadium and
Rio has floated for weeks. 
    "Arcadium offers Rio the full package," Scotiabank analysts
said on Sept. 10, adding that "the case (for a buyout) has
strengthened."
    At a presentation to investors on Sept. 19, Arcadium laid
out an aggressive growth strategy to nearly triple its adjusted
earnings by 2028 by developing its lithium projects across the
globe.    
    Rio's interest in Arcadium comes amid a rising wave of deal
interest across the mining industry, especially for critical
minerals needed to power the global energy transition.
    BHP  BHP.AX  - the world's largest miner - earlier this year
made an unsuccessful bid for smaller rival Anglo American
 AAL.L . Glencore  GLEN.L , 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)
 ((ernest.scheyder@thomsonreuters.com; X: @ErnestScheyder;
+1-469-691-7667; Reuters Messaging:
ernest.scheyder.thomsonreuters.com@reuters.net))