Rio Tinto’s Acquisition of Arcadium Lithium Sparks Debate

Mining giant Rio Tinto has made headlines by confirming its non-binding approach to acquire Arcadium Lithium. According to the Australian Stock Exchange (ASX), Rio Tinto intends to purchase Arcadium in an all-cash deal valued at approximately $US6.7 billion, or $9.9 billion in local currency. This acquisition has been accepted by Arcadium’s directors, led by Peter Coleman, the former CEO of Woodside.

The bid from Rio Tinto offers $US5.85 per share, representing a substantial 90 percent premium to Arcadium’s market value as of last Friday. However, the proposal has raised concerns among other stakeholders, notably the Australian investment fund Blackwattle Investment Partners, which holds a significant stake in Arcadium. Jarred Rubin, CEO of Blackwattle, argues that the offer undervalues Arcadium’s strategic international assets, particularly as lithium prices remain at a cyclical low. Rubin is advocating for Arcadium’s board to reject any offers below $US8 billion.

The acquisition is strategically significant for Rio Tinto, as it aims to enhance its lithium production capabilities. Arcadium’s primary assets are located in the Argentinian Andes, where the company extracts lithium from the groundwater beneath the Olaroz and Hombre Muerto salt pans. These operations are nearby Rio Tinto’s Rincon asset, which is expected to commence lithium production imminently.

Apart from these assets, the deal grants Rio Tinto ownership of an Australian hard rock lithium mine at Mt Cattlin located in south-west Australia. Though the Mt Cattlin mine is relatively small with a limited resource life, it complements Rio Tinto’s existing portfolio. Additionally, Arcadium has an undeveloped spodumene asset in James Bay, Canada.

Paul Graves, CEO of Arcadium, remarked that the offer recognizes the “full and fair long-term value” of the company. In contrast, Rio Tinto’s chief executive Jakob Stausholm stated that Rio intends to leverage its financial resources to expedite the development of Arcadium’s projects, which have recently been on hold as a cost-saving measure.

Meanwhile, the acquisition’s success hinges on winning approval from Arcadium’s shareholders. The agreement permits Rio Tinto to take control of a vertically integrated lithium business responsible for about five percent of the global battery mineral supply. The market and stakeholders will closely monitor Arcadium’s shareholder decisions in the coming weeks.