Lithium nirvana
Rio Tinto's $9.9 billion acquisition of Arcadium Lithium looks likely to succeed and could trigger further deals in the sector.
Rio Tinto’s $9.9 billion bid for US-Australian lithium miner Arcadium announced this week looks squeaky clean from most angles — with a juicy premium for Arcadium shareholders, board approval from both sides, and a positive market reaction on the ASX and in London.
While there are clearly still risks for both sides, the ramifications of the deal (should it go ahead) for the lithium market globally and for the midcap sector on the ASX are potentially far more profound than the dynamics of the transaction itself.
For starters, the Arcadium bid represents a major vote of confidence from one of the world’s biggest miners in lithium, a commodity that has struggled over the past two years but which remains an essential ingredient in electric vehicle batteries.
Rio’s offer is based on an expected 10% compound annual rate of growth in the lithium price between now and 2040. That’s the same commodity that has fallen about 80% since hitting record highs in December 2022.
