Gerardo Del Real,
Editor
Oct. 9, 2024
Rumors of lithium’s death have been greatly exaggerated. So says Mining giant Rio Tinto who just paid a 90% premium from Friday’s closing price to buy Arcadium Lithium (ASX: LTM) for US$6.7B in an all-cash deal.
The deal positions Rio Tinto to become one of the world’s largest lithium suppliers (behind Albemarle & SQM). The deal also signals a bottom in the lithium space and is likely to ignite a wave of opportunistic M&A.
Rio Tinto CEO Jakob Stausholm said: “Acquiring Arcadium Lithium is a significant step forward in Rio Tinto’s long-term strategy, creating a world-class lithium business alongside our leading aluminum and copper operations to supply materials needed for the energy transition. Arcadium Lithium is an outstanding business today and we will bring our scale, development capabilities and financial strength to realize the full potential of its Tier 1 portfolio. 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.”
Putting aside whether or not this is a good deal for existing Arcadium shareholders, the deal is a major endorsement for the future of lithium demand.
Rio Tinto highlighted that the transaction was motivated by Arcadium’s assets being high margin assets even at the bottom of the cycle.
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The presentation went on to explain that Rio Tinto has been consistent in its belief in the long-term outlook for lithium with an expected market deficit emerging from the end of this decade and a double-digit growth rate to 2040.
Rio’s CEO went on to say that “lithium is one of the fastest growing markets today and is expected to reach an even greater scale in the coming decades.”
Then, there’s this additional tidbit from Rio’s CEO: “We have complementary geographic footprints and share rich experience operating in Argentina and Quebec, Canada, where we plan to establish world-class lithium hubs benefiting from economies of scale and deep local knowledge.”
Everyone knows the two Quebec lithium players I placed bets on a few years back. Bets that have paid off handsomely and bets that will continue to pay off.
The transaction is a shot across the bow at other lithium majors and chemical companies looking to expand their footprint and take advantage of what will be the sweet-spot of the profit cycle.
We are in a commodity supercycle that includes lithium, uranium, copper, precious metals, etc.
The multiple services we offer are positioned perfectly to take advantage of this cycle.
From private placements for accredited investors, to those of you that take a more cyclical and patient approach to speculating in the resource space, there are a suite of services we’ve created to take advantage of this next leg higher.
Let's get it,
Gerardo Del Real
Editor, Daily Profit Cycle