During the industry downturn, Rio Tinto intensifies its layout by acquiring lithium mining company Arcadium for a premium of $6.7 billion USD
After the acquisition is completed, Rio Tinto will become the world's third-largest lithium supplier. Since the beginning of this year, lithium prices have remained depressed due to fundamental supply and demand factors, with the global benchmark price of lithium carbonate falling by more than 20% to $10,800 per ton
Against the backdrop of oversupply in the lithium market, mining giants are making major moves.
On Wednesday, mining giant Rio Tinto Group announced that it has reached a final acquisition agreement worth $6.7 billion with the U.S. lithium producer Arcadium Lithium plc.
Rio Tinto stated that the transaction will be conducted in cash, with a transaction price of $5.85 per share, a 90% premium over Arcadium's closing price of $3.08 per share last Friday. If the acquisition plan is successfully completed, Rio Tinto will become the world's third-largest lithium supplier, behind only Albemarle and SQM.
Prior to Rio Tinto's tender offer, analysts at CreditSights had stated that for Rio Tinto, compared to investing billions of dollars in greenfield projects in high-risk jurisdictions, mergers and acquisitions "may be a better way to quickly gain access to the lithium business."
CreditSights stated:
"This transaction will not only allow Rio Tinto to increase its lithium assets, but also to rapidly expand through brownfield investments."
Rio Tinto CEO Jakob Stausholm stated:
"This acquisition is an important step forward in Rio Tinto's long-term strategy. We will create a world-class lithium business together with our leading aluminum and copper businesses to supply the materials needed for the energy transition."
Rio Tinto's significant entry into the lithium market comes at a low point in the industry, with lithium prices fluctuating lower due to supply and demand fundamentals.
Analysts such as Matty Zhao from Bank of America Merrill Lynch have stated that there is currently no substantial rebalancing in the oversupply of the lithium market, and due to the slowdown in electric vehicle sales, global lithium demand has also decreased, keeping lithium prices under continued pressure.
According to related data, year-to-date, the benchmark price of lithium carbonate, which accounts for 99.2% of global production, has cumulatively fallen by over 20% to $10,800 per ton, while the spot price of lithium carbonate in China has fallen by over 30%, closing today at 73,700 yuan per ton.
