Rio Tinto in talks to acquire Arcadium amid slumping lithium prices

Rio Tinto has confirmed it is in the process of acquiring lithium producer Arcadium Lithium after prices for the essential metal have started to fall. Both companies quickly confirmed the discussions to Reuters on Monday, after the outlet reported Arcadium could be worth up to USD 6 billion to USD 4 billion.

A finalisation of the acquisition would catapult Rio Tinto to a leading position as the world’s lithium producer, placing it right in behind industry powerhouses Albemarle and SQM. The move follows the global tide of clean energy, including battery and energy storage systems to power electric vehicles (EVs).

Lithium prices have been falling, in part due to oversupply from China, and the talks come when prices have wobbled. Since January, the stock of Arcadium has plunged more than 50 percent and is now an attractive acquisition target. Shares of Arcadium soared as high as 50% on the Australian exchange, closing AUD 6.09 — up 46%. Shares of the US listed company also rose nearly 35.4 percent before the market opened. However, Rio Tinto’s stock fell by 2%.

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Rio Tinto said that the discussions are ongoing, and it cannot be binding and an agreement is not reached. But a successful acquisition would provide Rio access to other lithium mines and processing facilities in Argentina, Australia and Canada, and the US, which would jump-start future lithium demand, analysts say.

Some investors, however, questioned the high valuation Arcadium had. Argo Investments' Andy Forster said Arcadium's balance sheet may not be sufficient to accomodate all the company's growth projects. Arcadium has a stakeholder in Blackwattle Investment Partners, which warned that offers close to the reported valuation could under value the company, adding that Arcadium's sale at that price could undervalue it at USD 8bn.

As the market for lithium evolves, the potential acquisition highlights the strategic moves major players like Rio Tinto are willing to make to secure their future in the booming clean energy sector.