Rio shopping for lithium companies as value soars

Lithium ion batteries are a significant user of the commodity.

Mining giant Rio Tinto is believed to be actively scouting the market for lithium acquisitions, according to sources.

It comes as the price of lithium, used to make batteries in electric vehicles, has rocketed almost 250 per cent in the past year to hit about $US494 ($788) a tonne at the start of the month.

Rio Tinto and major rival BHP have been expected to gear up for mergers and acquisitions for some time.

BHP has already shown its willingness to get out its cheque book for buyouts, offering $8.37bn to acquire OZ Minerals in a proposal that was rejected by the target.

Rio has been conducting trial tests in Canada for processing lithium ore and is also carrying out trials on the lithium ore of its competitors, namely emerging lithium producer Sayona Mining.

Options for Rio include offtake deals with third parties.

Buyout targets in Australia could include IGO, Pilbara Minerals, Mineral Resources, Allkem, Core Lithium and Lion Town.

But buying one now would seem odd timing, given they have undergone a major share price rally, and a deal may not be seen as good value for Rio.

Yet it has signalled an entry into new areas and its aluminium and copper production is now declining.

Rio has been developing the Jadar lithium project in Serbia, but has struck problems when the Balkan nation’s government opposed the development after Rio had already spent about $US450m working on the deposit, a flagship of its growth strategy into the battery minerals sector.

Overall, it has committed $2.4bn to the project.

The lithium market is currently abuzz with activity.

Some report that most activity at the moment concerns offtake agreements and buying stakes in assets at a time when investors are looking to capitalise on a transition towards electric vehicles. There is also some activity at the small end of the market, but it could morph into larger mergers and acquisitions.

One of the largest deals in the market is looming from Chris Ellison’s Mineral Resources, and involves a spin-off of its lithium operations into a separately listed vehicle in New York.

JPMorgan is working on the plan for the company, which has support from the strong US dollar and could be worth as much as $7bn.

Rio Tinto’s share price closed at $95.64 on Thursday after reaching a high of about $133 in July this year.