Rio Tinto (RIO, Financial), a renewed metal and mining company, recently embarked on a $5.7 billion takeover of Arcadium Lithium, making it the third largest producer of lithium in the world. The $865 million acquisition at a 90% premium over the last closing price points to Rio's plan to shift from the New Zealand market to focus on high demand-low carbon resources crucial for the EV revolution.
However, as the market is supplied at the present time, Rio Tinto CEO Jakob Stausholm believes long-term for several years or until the end of the decade there will be a critical shortage of supply. It gives Rio leading lithium assets in Argentina, Australia, Canada and the USA, which could propel it for years and keep it connected to the world's leading automotive companies like Tesla, BMW and General Motors.
The timing of this acquisition was perfect. Generally, lithium prices are down due to a slight halt in the sales of EVs, and China is flooding the market with its production. This bullish outlook has Rio on track to mesh its lithium resources with operations of Arcadium, which would lean on the combined experience and capacity, sustaining its known capex syntax of $10 billion for the years 2025 and 2026.
This intense expansion dynamic is diametrically opposed to BHP Group's (BHP, Financial) attempt at acquiring Anglo American (ANGPY, Financial) for $49bn, which was halted by the British regulators, as the mining industry is particularly competitive and often regulated. This latest acquisition, on track to be completed in the middle of 2025, is more than a market expansion; it is a future play on renewable energy and electric mobility.
