Rio Tinto to buy Arcadium Lithium for $6.7 billion

The mining giant Rio Tinto has agreed to buy Arcadium Lithium for $6.7 billion. The deal should give Arcadium, one of the world’s largest lithium miners, the capital needed to fuel its expansion plans.

Rio Tinto has spent more than $1 billion on lithium projects in Serbia and Argentina without much to show for it. The project in Serbia has faced delays because of environmental concerns, and the Argentine project will reach only pilot-scale production later this year.

The acquisition, contingent on 75% shareholder approval, will immediately take Rio Tinto from the edges of the lithium market to the center, according to Chris Berry, president of the battery mineral research firm House Mountain Partners. Arcadium, formed earlier this year through the merger of Livent and Allkem, already produces 75,000 metric tons of lithium chemicals per year and hopes to more than double output by 2028.

Arcadium estimates that it will need to spend more than $1.5 billion across several projects to achieve its production goals. But Andy Leyland, co-founder of the battery supply chain consultancy SC Insig​hts, says it would have been difficult for Arcadium to raise the money, especially after the price of lithium collapsed over the course of 2023. Leyland says Rio Tinto, which reported more than $10 billion in profit last year, has the resources to support Arcadium’s growth.

“Realistically, Arcadium would have struggled with its expansion plans,” Leyland says. “In that respect, Rio was a bit of a white knight.”

The drop in lithium prices gives buyers like Rio Tinto an opportunity to scoop up lithium projects at a bargain. When Livent and Allkem announced their plans to merge in May 2023, they had a combined market capitalization of more than $10.6 billion. Before Rio Tinto announced that it was considering an acquisition, Arcadium’s value was less than a third of that. In August, Pilbara Minerals also took advantage of low lithium prices to purchase a lithium mine in Brazil for $377 million.

Berry says Arcadium is attractive because it has projects exploiting both brine and hard rock across a range of geographies. Arcadium is also exclusively focused on lithium, while other major lithium producers, such as SQM and Albemarle, have other chemical businesses.

While Arcadium has high-quality brine ponds in Argentina, its hard-rock projects are less compelling, Berry says. Arcadium recently announced that it would pause investment into hard-rock mines in Australia and Canada until lithium prices rise. But Berry says those mines could become important as the demand for lithium continues to grow.

Meeting that demand will require a lot of money. And Berry argues that having a deep-pocketed firm like Rio Tinto enter lithium mining will help. “You’re going to need some pretty significantly large slugs of capital to make that happen,” he says. “That’s what Rio Tinto brings.”