Rio Tinto confirms takeover approach made to Arcadium Lithium

After weeks of speculation, global mining giant Rio Tinto (ASX: RIO) has confirmed it has approached Arcadium Lithium (ASX: LTM) regarding a deal that could make it the world’s third-largest producer of the electric vehicle battery metal.

The approach is non-binding and Rio said there is no certainty that any transaction will be agreed to or proceed, nor have they indicated whether consideration for a takeover would be in the form of cash, shares or a mix of both.

The companies are believed to have been in ongoing talks that culminated during last week’s LME Week conference in London, resulting in Rio making a statement this morning to confirm its bid.

Major supplier

The takeover of Arcadium could potentially transform Rio into one of the world’s largest lithium suppliers — behind only Albemarle and Sociedad Química y Minera de Chile SA (SQM) — at a time when the growing use of lithium-ion batteries in electric vehicles and consumer electronics is beginning to surge.

It would give Rio access to lithium mines, processing facilities and deposits across four continents to meet rising demand, as well as a customer base that includes Tesla, BMW and General Motors.

A recent slump in global lithium prices — due in part to Chinese oversupply — has pushed Philadelphia-based Arcadium’s shares down more than 50% since January, which is believed to have made the company an attractive takeover target.

DLE expertise

Rio could also gain from Arcadium’s expertise in the direct extraction of lithium (DLE), which aims to mechanically extract the ultra-light metal from brines.

Arcadium has been using DLE in Argentina since the 1990s and is one of the few companies to have commercially launched the process without employing evaporation pools.

Lithium projects

As one of the world’s biggest mining companies, Rio is best known for its copper, iron ore and diamond assets.

The group produces lithium at a number of significant projects, saying it is “part of our portfolio of materials essential to a low-carbon future.”

Rio is extracting and producing battery-grade lithium carbonate from raw brine at the Rincon development in Argentina, while at the $3.6 billion Jadar project in Serbia, the group is planning the construction of what will become Europe’s biggest lithium mine after discovering a lithium sodium borosilicate mineral known as jadarite in 2004.