The tide may be turning for the lithium sector as media speculation of a takeover play for Arcadium Lithium (ASX:LTM) by Rio Tinto (ASX:RIO) is confirmed.
News reports emerged late last week that the mining giant had been continuing talks with Arcadium for a potential deal worth somewhere in the vicinity of between US$4 billion ($5.88 billion) and US$6 billion ($8.82 billion).
The deal would make Rio Tinto the third largest producer of lithium in the world. Scotiabank analysts said in September “Arcadium offers Rio the full package” and the case for a takeover had strengthened.
On Monday (7 October) Rio Tinto “confirmed that it has made an approach to Arcadium Lithium regarding a potential acquisition of Arcadium Lithium by Rio Tinto”.
“The approach is non-binding and there is no certainty that any transaction will be agreed to or will proceed.”
The news sent Arcadium Lithium shares up over 50% to an intra-day high of $6.29.
Lithium players are becoming increasingly attractive to suitors with the falling price of the battery metal impacting share prices.
Arcadium’s share price has fallen from a 52-week high of $11.57 in late December 2023 to its September 2024 low of $3.30 – marking an over 71% decline over that time.
This saw the company fall off the S&P/ASX 100 index in September.
In its Q2 2024 report released in early August, Arcadium revealed it was booking a realised average price of US$17,200 per tonne for lithium hydroxide and carbonate for the quarter.
The company said at the time it was tracking towards the high end of its $60 million to $80 million cost savings target for 2024 and was accelerating further cost reductions.
It expects to slash capital spend by some US$500 million over the next two years in response to current market conditions.
CEO Paul Graves said despite where lithium markets are currently, Arcadium still sees a “strong long-term growth trajectory for lithium demand and expect a return to healthier market fundamentals over time”.
“However, the market is clearly indicating that the industry does not need to add supply at the same pace as previously expected,” he said. “We have therefore decided to defer investment in two of our four current expansion projects.”
In early September, Arcadium suspended the expansion of its Mt Cattlin operation in Western Australia due to the continued decline in spodumene prices, and plans to place the entire operation on care and maintenance in the first half of 2025.
Arcadium, which has a market capitalisation of $4.46 billion, has operating resources in Argentina and Australia and downstream conversion assets in the US, China, Japan and the UK, as well as a portfolio of ongoing development projects in Argentina and Canada.
In the US, the company operates the only integrated mine-to-metal production facility in the western hemisphere for high-purity lithium metal, a core component of next generation battery technologies.
Arcadium emerged from a merger between US-based Livent and Australia’s Allkem in January this year.
Write to Angela East at Mining.com.au
Images: Arcadium Lithium
