Rio Tinto Acquires Arcadium for $6.7 Billion

By Ernest Scheyder and Clara Denina

(Reuters) – Rio Tinto (NYSE: RIO) has announced a $6.7 billion buyout of Arcadium, enhancing its lithium filtration technologies crucial for revolutionizing lithium production in the electronics and electric vehicle industries.

Arcadium specializes in direct lithium extraction (DLE), a technology anticipated to become mainstream alongside rivals like Eramet, Sunresin, and Exxon Mobil (NYSE: XOM). The DLE industry is projected to surpass $10 billion annually in the coming decade, promising lithium supply for EV batteries much faster than traditional methods.

Unlike water-intensive evaporation ponds and open-pit mines, DLE aims to extract over 90% of lithium from brines. No commercial DLE operation has been launched independently of ponds yet, but competition is heating up.

Arcadium's historical experience in DLE stems from a 1990s development at an Argentine lithium brine site. Although the site still utilizes ponds, Rio seeks to leverage Arcadium's knowledge as it explores lithium deposits in Chile, where DLE is becoming a requirement.

"DLE is the solution to provide the lithium that the world needs," stated Rio CEO Jakob Stausholm, revealing the deal values Arcadium at a 90% premium based on pre-discussion share prices.

Arcadium operates in proximity to a DLE project that Rio invested in last year, though it has not yet generated lithium. Due to Rio's limited experience in chemical processing, the acquisition is a strategic move to bolster its capabilities in lithium production.

DLE processing has over 20 complex steps involving detailed chemical analysis of multiple brine deposits. Arcadium’s extensive research equips them uniquely to navigate these challenges.

In addition to its projects, Arcadium has a stake in EnergySource Minerals, expected to begin commercial production by 2025.

DLE COMPETITORS

Rio’s ambitions to bring DLE technology to the forefront face significant industry competition. Notably, a scientist behind Arcadium's Argentina site is now at International Battery Metals, which has attracted attention from Exxon and Chevron for their modular DLE facility.

Additionally, Albemarle (NYSE: ALB), the top lithium producer globally, is testing DLE methodologies in Arkansas and Chile. SQM, based in Santiago, has partnered with the Chilean government to expand its production, partially through DLE.

Experts, including Eric Norris from Albemarle, emphasize the need for chemical processing expertise in advancing DLE technology, highlighting the competitive landscape that includes companies like Vulcan Energy, EnergyX, and Standard Lithium moving forward with their DLE innovations.