Rio Tinto and Arcadium Lithium announced a definitive agreement under which Rio Tinto will acquire Arcadium in an all-cash transaction for US$5.85 per share. (Earlier post.) The transaction represents a premium of 90% to Arcadium’s closing price of $3.08 per share on 4 October 2024, a premium of 39% to Arcadium’s volume-weighted average price (VWAP) since Arcadium was created on 4 January 2024, and values Arcadium’s diluted share capital at approximately $6.7 billion.

The transaction will bring Arcadium’s complementary lithium business into Rio Tinto’s portfolio, establishing a global leader in energy transition commodities—from aluminium and copper to high-grade iron ore and lithium.

Arcadium is a global, fast-growing, vertically integrated lithium chemicals producer with an asset base of long-life, low-cost operations and growth projects. It has leading capabilities in lithium chemicals manufacturing and extraction processes, including hard-rock mining, conventional brine extraction and direct lithium extraction.

Arcadium’s current annual lithium production capacity across a range of products including lithium hydroxide and lithium carbonate is 75,000 tonnes lithium carbonate equivalent, with expansion plans in place to more than double capacity by the end of 2028.

Arcadium’s global operations, comprising approximately 2,400 employees, include facilities and projects in Argentina, Australia, Canada, China, Japan, the United Kingdom and the United States.

Acquiring Arcadium Lithium is a significant step forward in Rio Tinto’s long-term strategy, creating a world-class lithium business alongside our leading aluminium and copper operations to supply materials needed for the energy transition. Arcadium Lithium is an outstanding business today and we will bring our scale, development capabilities and financial strength to realize the full potential of its Tier 1 portfolio. This is a counter-cyclical expansion aligned with our disciplined capital allocation framework, increasing our exposure to a high-growth, attractive market at the right point in the cycle.

—Rio Tinto Chief Executive Officer Jakob Stausholm

Tier 1 assets. Arcadium is one of the world’s leading global lithium platforms, with diversified production and processing capabilities, a broad range of high-performance lithium products, a highly attractive suite of growth projects, and long-term blue-chip customer relationships. Its Tier 1 assets have maintained high margins through-the-cycle, and its resource base is expected to support ~130% capacity growth by 2028 within Rio Tinto’s existing geographies.

Rio Tinto’s and Arcadium’s combined assets will represent the world’s largest lithium resource base and make Rio Tinto one of the leading lithium producers globally on a pro-forma basis.

Complementary capabilities. Rio Tinto has the balance sheet strength and proven project delivery capability to execute and, over time, accelerate the full potential from Arcadium’s Tier 1 resource base. Rio Tinto and Arcadium have complementary footprints and deep experience in Argentina and Québec, where Rio Tinto expects to establish world-class lithium hubs with clear opportunities for sharing skillsets and reducing costs.

Combining Rio Tinto and Arcadium’s technological leadership in lithium extraction, the transaction will position Rio Tinto to become a market leader in lithium processing. Rio Tinto looks forward to building on Arcadium’s history of commercial excellence that includes multi-year relationships with leading OEMs and battery companies, by ensuring reliable, low-cost and sustainable supply.

Compelling economics. The transaction offers compelling value driven by accelerating volume growth in a rising market contributing to significantly higher EBITDA and free cash flow in the outer years, before anticipated synergies.

Acquiring Arcadium is consistent with Rio Tinto’s disciplined approach to capital allocation and will unlock significant value for shareholders, underpinned by the financial strength that we will bring. Rio Tinto will maintain its strong balance sheet following the close of this transaction, in line with its Single A credit rating, as well as its long track record of shareholder returns. Rio Tinto expects Arcadium’s projected growth capital expenditure to represent approximately 5% of Rio Tinto’s group capital expenditure of up to $10 billion across 2025 and 2026.

Right timing. Rio Tinto is confident in the long-term outlook for lithium, with more than 10% compound annual growth rate in lithium demand expected through to 2040 leading to a supply deficit. With spot lithium prices down more than 80% versus peak prices, this counter-cyclical acquisition comes at a time with substantial long-term market and portfolio upside, underpinned by an appealing market structure and established jurisdictions.