Thematic Spotlight: Rio Tinto Jumps Into The Lithium Pit

Last week, Rio Tinto officially announced a definitive agreement with Arcadium Lithium to fully acquire the lithium miner in an all-cash transaction worth US$6.7 billion.¹ The deal, which marks Rio Tinto’s biggest acquisition since 2007, is important for multiple reasons.² For one, the addition of Arcadium’s lithium resources will make Rio Tinto the world’s third largest lithium miner, behind only US-based Albermarle and Chile’s SQM.³ But perhaps more importantly, Rio Tinto’s acquisition shows a commitment and confidence in future lithium demand that is in stark contrast to fellow diversified mining giants such as BHP and Glencore – both of which have said the market may be oversupplied for the foreseeable future.⁴

Rio Tinto’s purchase, as described by CEO Jakob Stausholm, is a “counter-cyclical” manoeuvre. For context, the spot price for lithium carbonate, a raw material most commonly associated with EV batteries, is currently down more than 85% from its peak in 2022. Most lithium miners around the world have also dialled back on new investments. Pilbara Minerals, for example, has reduced capex guidance for FY24-25 and put both its growth projects – the build out of Salinas Lithium Mine in Brazil and expansion of Pilgangoora in Western Australia – on hold.⁵ Albermarle, the world’s most valuable lithium company, has also urged fellow miners to halt investment in supply – noting that current lithium prices cannot justify further investments.⁶

Certainly, sentiment around the industry appears to be at or near its lowest. But if the goal is to buy low and sell high, then it is when sentiments are most bearish, that there often lies opportunity for a turnaround. Indeed, in a world where EV demand has cooled significantly due to international tariffs and slowing government support, Rio Tinto’s acquisition of Arcadium Lithium is a show of confidence. A sign that pockets of the market still strongly believe both lithium and the EV industry could return to sustainable, long-term growth.

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