Rio Tinto Ltd booth. on the opening day of the Investing in African Mining Indaba in Cape Town, South Africa, on Monday, Feb. 6, 2023.
Dwayne Senior | Bloomberg | Getty Images
The second largest miner in the world Rio Tinto said Wednesday it would buy US lithium producer Arcadium for $6.7 billion.
Rio Tinto said the deal would be all-cash for $5.85 per share, representing a 90% premium to Arcadium’s Oct. 4 closing price of $3.08 per share.
Arcadium Lithium’s market value currently stands at $4.56 billion, according to LSEG data, with shares up 37% so far this week. London-listed Rio Tinto shares are down 4.7% so far this week.
News of the transaction confirms an announcement earlier this week that the two companies were in talks. If the deal goes through, Rio Tinto will become one of the largest lithium suppliers, behind only Albemarle and SQM.
Rio Tinto CEO Jakob Stausholm said the acquisition is “an important step forward in Rio Tinto’s long-term strategy, to create a world-class lithium business alongside our leading aluminum and copper operations to provide the necessary materials for the energy transition.”
Arcadium Lithium CEO Paul Graves said his company “believes this is a compelling cash offer that reflects the long-term overall value of our business and de-risks our shareholders’ exposure to the use of our development portfolio and market volatility.” “
The move comes as mining companies seek to secure precious minerals for the world’s energy revolution. Lithium prices have been under pressure due to Chinese oversupply. Prices for benchmark 99.2% lithium carbonate have fallen more than 20% year to date to $10,800 per metric ton, FactSet data shows.
Graves added that the deal will give the company “an opportunity to accelerate and expand our strategy, for the benefit of our customers, our employees and the communities in which we operate.”
In the same sector in May, a major merger collapsed after BHP Group said it would not make a firm offer for Anglo American, after the latter rejected a request to extend takeover talks. The proposed takeover was part of an effort to create a copper mining juggernaut and capitalize on the base metal’s key role in the green energy transition.
—CNBC’s Karen Gilchrist contributed to this article.
Correction: This story has been updated with the correct current market value of Arcadium Lithium at the time of publication.
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