Mining giant Rio Tinto announced an all-cash $6.7 billion deal for Arcadium Lithium, vaulting the iron ore leader into a top-tier producer of the battery metal. Rio Tinto had also reportedly considered a bid for Albermarle before honing in on Arcadium.
For U.K.-based Rio Tinto, which gets the bulk of its revenue from iron ore, the deal marks a major step toward repositioning it as a leader in commodities key to the energy transition. Rio is capitalizing on the current lithium market surplus that has crashed prices, though the market could face supply deficits by the end of the decade as the shift to EVs gathers steam.
Rio Tinto Feasts On Fallen Lithium
Rio agreed to pay $5.85 per share, a 90% premium to the Oct. 4 closing price. Shares of Arcadium spiked the next day on a Reuters report that Rio had approached Arcadium. Ahead of that news, The Australian newspaper had reported Rio's interest in acquiring either Arcadium or Albemarle.
Arcadium was formed with the merger of U.S.-based Livent, which was spun out of FMC Corp. in 2019, with Australia's Allkem. The combination created a combined company valued at $10.6 billion in December 2023.
Albemarle has a current market value of $11.8 billion, though ALB stock is 43.5% below its 52-week high and down 70% from its all-time high in November 2022.
Lithium stocks collapsed along with prices for the key battery metal as supply got ahead of demand that has materialized slower than expected. Trading Economics shows that the price for lithium carbonate has fallen to 76,500 yuan, or $10,823, per metric ton. That's down from a peak of 597,500 yuan, or $84,534, based on the current exchange rate.
The current price is too low to incentivize new production, so companies across the industry, including Albemarle and Arcadium have taken steps to curtail output or delay capacity expansions. Those measures appear to have succeeded in establishing a bottom for lithium prices last month, sending lithium stocks to make another run at breaking their long downtrends.
Lithium Stocks Rise On RIO Deal
Rio stock slipped 1.65% to 65.56 in early Wednesday stock market action, after terms of the Arcadium deal were announced. ALTM jumped 30% to 5.52.
Rio shares, like other commodities stocks, have been volatile lately, surging on news of ramped-up stimulus in China but falling on Tuesday amid worries that the stimulus won't be as forceful as hoped.
Lithium stocks also have participated in the China rally. In a late Tuesday note, Wells Fargo analysts said that higher EV sales in China should provide support for lithium prices in 2025. The analysts raised their price target for ALB stock to 110 from 100, keeping an equal weight rating.
Albemarle stock rose 2.65% to 102.92 early Wednesday. ALB stock is a name that may be worth keeping an eye on once it retakes its 200-day moving average.
Other lithium stocks also were higher. Lithium Americas rose 4.4%, and Sigma Lithium 3.9%.
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