The Arcadium Lithium CDI (ASX: LTM) share price is up 44% after receiving some takeover interest from Rio Tinto Ltd (ASX: RIO).
Rio Tinto is one of the world’s largest miners, it’s involved in a number of commodities including iron ore, copper, aluminium and boron. It also has a small lithium project called Rincon in South America. It is seemingly interested in expanding its lithium exposure further.
Rio Tinto interested in Arcadium Lithium
The mining giant announced in an ASX release that it had made an approach to Arcadium Lithium about a potential acquisition of Rio Tinto to buy Arcadium Lithium.
Rio Tinto said the approach is “non-binding” and there is “no certainty that any transaction will be agreed to or will proceed”.
The ASX mining share also said that it would not make further comment until or unless an update “is appropriate.”
If any deal is to happen, it will be a large deal. According to the ASX, the market capitalisation is over $4.4 billion after today’s jump.
What lithium assets does Arcadium Lithium have?
The business has operating projects in Argentina and Australia, as well as ‘downstream’ conversion assets in the US, China, Japan and the UK.
Arcadium Lithium also says it has multiple ongoing development projects in Argentina and Canada.
In the US, it operates the only integrated ‘mine-to-metal’ production facility in the Western hemisphere for the high purity lithium metal which is needed for batteries.
Does a deal make sense?
Shareholders and management of the lithium miner will need to decide what Arcadium Lithium share price they’re willing to accept and Rio Tinto’s shareholders and management will have to decide if they’re willing to pay that price.
Lithium is an important commodity and it’s predicted to see a lot of demand growth in the coming years, assuming it remains the resource of choice for car and home/industrial batteries.
Large lithium operations could make sense for Rio Tinto, and lithium prices are currently weak after demand growth slowed amid global economic challenges and increased supply from places like Africa. Buying at a weak point could be smart. Personally, I’d rather Rio Tinto focus on copper though. There is a chance that another commodity could be used for batteries in the future.
For me, I’d prefer to look at other ASX dividend shares.
