Rio Tinto Acquires Arcadium Lithium for $6.7 Billion

Investing.com — Rio Tinto (NYSE:RIO) has acquired Arcadium Lithium for $6.7 billion, a deal signaling the increasing M&A value of lithium assets, according to Wells Fargo analysts.

The acquisition represents a 90% premium to ALTM's closing price on October 4 and is expected to be finalized by mid-2025. This values ALTM at approximately 14.4x trailing 12-month EBITDA.

At this price point, the acquisition equates to around $89,000 per tonne of lithium production, based on ALTM's current output of 75,000 tonnes of lithium carbonate equivalent (LCE).

Wells Fargo highlights that this move strengthens Rio Tinto's position in the lithium market, potentially positioning it as the world's largest lithium resource base on a pro-forma basis.

The acquisition aims to expand Rio's Tier 1 lithium asset growth, with ALTM projected to double production by 2028, reducing cost per tonne to around $45,000.

Wells Fargo also notes Rio Tinto's positive long-term outlook on lithium demand, expected to grow at a CAGR of 10% through 2040. By acquiring ALTM closer to the trough of the lithium cycle, Rio hopes to establish itself as a leader in lithium processing and to benefit from a future supply deficit.

Additionally, the transaction has broader implications for Albemarle (NYSE:ALB). Wells Fargo suggests that the acquisition likely removes ALB from the list of potential acquisition targets and indicates that ALB's production base is undervalued, estimating it could be worth approximately $17.9 billion based on its expected production capacity of 200,000 tonnes LCE in 2024.