Rio Tinto confirmed today that it has approached Arcadium Lithium about a possible takeover, a deal that would make Rio Tinto one of the largest producers of lithium in the world.
In a statement to the markets this morning, Rio Tinto said: “The approach is non-binding and there is no certainty that any transaction will be agreed to or will proceed”.
Reuters reported that the companies had been holding talks last week, suggesting that Arcadium could be valued at $4bn (£3bn) to $6bn (£4.6bn), or potentially even higher.
The approach comes after a sharp fall in global lithium prices, partly as a result of the economic slowdown in China and sagging demand for EVs.
Lithium prices have lost around 20 per cent in the year so far, which has knocked Arcadium’s share price. Its shares are down by around half this year.
However, Lithium is seen as a critical mineral in the global energy transition, particularly for its use in the batteries required to build EVs.
Demand is forecast to increase by nearly 500 per cent by 2050. As such, analysts expect the recent slump in lithium prices to reverse in the near future.
A recovery in lithium prices would likely support Arcadium’s share price. Arcadium has lithium mines, processing facilities and deposits in Argentina, Australia, Canada and the US, making it an attractive prospect for Rio Tinto.
Rio Tinto said it will “not make further comment until or unless an update is appropriate.”