Rio has long dreamt of lithium glory

While BHP has long abstained from entering the lithium market, Rio Tinto has long been eager to gain more exposure to the popular battery metal.

Rio has been a lithium producer since the early 1900s, recovering battery-grade lithium from boron waste piles at its Boron mine in California. But it hasn’t been a lithium producer of scale.

Even when, in 2004, geologists discovered the globally significant Jadar lithium project in Serbia was Rio no closer to becoming a lithium major.

While the Serbian Government recently changed their tune on Jadar, the mine continues to face environmental resistance from the Serbian public, and there still no indication of when Jadar will get into development nor production.

Aside from Boron and Jadar, Rio Tinto is looking to produce lithium from its Rincon project in Argentina shortly.

Even then the company has had to go to great lengths to get Rincon off the ground.

“The (Rincon) project involved building an airstrip in a region that stands 3.8km above sea level,” Rio Tinto chair Dominic Barton said at the company’s annual general meeting (AGM) in May.

“This gives you – I hope – a sense of how physically and operationally demanding it is to provide the vast quantities of metals and minerals the world needs to grow and transition to renewable energy.”

Rio Tinto’s lithium endeavours in the US, Serbia and Argentina highlight the company’s appreciation of the battery metal.

And if it can’t scale through organic pathways, buying another company might help speed things up.

This is what Rio did when it announced its acquisition of vertically integrated Arcadium Lithium this week, a company that was only formed earlier this year from the merger of Allkem and Livent.

Arcadium oversees both upstream and downstream lithium operations, which would be incredibly appealing to any mining company, let alone Rio.

“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,” Rio chief executive officer Jakob Stausholm said.

“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 said the acquisition is the “right timing”.

“Rio Tinto is confident in the long-term outlook for lithium, with more than 10 per cent compound annual growth rate in lithium demand expected through to 2040 leading to a supply deficit,” the company said.

“With spot lithium prices down more than 80 per cent 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.”

Rio would’ve likely taken Arcadium’s waning share price into account as well. The company, which is dual listed on the New York Stock Exchange and ASX, saw its share price drop to $3.44 per CDI in early September, having traded above $10 per CDI earlier in the year.