There’s been suggestions for some time that Rio Tinto may join mining giant peer BHP in embarking on a big acquisition, and some believe that a major deal in the lithium space may now not be too far away.
At least that was the chatter that came out of the recent global gold mining conference in Denver, Colorado, where some of the most influential mining executives were present.
Two targets thought to be in Rio Tinto’s cross hairs are the lithium companies Arcadium and the world’s largest lithium producer, Albemarle.
Rio Tinto’s market value is close to $47bn whereas Albemarle has a market value of $US11bn so it’s well within its grasp, while Arcadium Lithium would be a more modest deal with its market value at $US3bn.
It’s worth remembering that Albemarle jointly owns the high-quality Greenbushes lithium mine in Western Australia with IGO, so any deal would have implications for them.
Last year Albemarle tried to buy the Australian-listed Liontown Resources for $6.6bn before mining billionaire Gina Rinehart put a stop to the move by acquiring a blocking stake.
Rio Tinto has previously been deterred because it viewed the sector as overvalued.
But if Rio Tinto is keen to make a major acquisition in the lithium industry, which is understood to have been one of its areas of focus, now could be the time to strike due to the lithium price coming off highs last year and now being at low levels.
Albemarle’s market value has almost halved in the past year, and Arcadium’s has more than halved.
Embarking on an acquisition is one way to build a big position quickly in lithium, the material used to make batteries used in electric vehicles, which are tipped as the future form of transport as part of the clean energy transition.
Arcadium operates in the same jurisdictions as Rio, including Argentina where Rio Tinto has the Rincon Lithium project and has hard rock lithium in Canada where Rio has operations in commodities iron ore and mineral sands. Albemarle operates in Rio’s market of Australia, but also the United States and Chile which would be a new frontier.
Rio also has its Jadar Valley lithium project in Serbia.
Mergers and acquisitions have been clearly on the agenda of big miners, with the $230bn BHP making efforts to buy London-listed mining giant Anglo American this year. Its last offer valued the target at $74.2bn. But its offer was rejected and Anglo American instead opted to pursue a company break-up.
One industry expert said Rio Tinto was acquisitive, although lithium formed a reasonable amount of its portfolio already, Buying a group such as Albemarle would provide it with more production.
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