In a counter-cyclical move, Rio Tinto on Wednesday announced a $6.7-billion acquisition of Arcadium Lithium, propelling the world’s second-biggest miner into the ranks of major lithium producers.

Bringing Arcadium’s lithium business into its portfolio strengthens Rio Tinto’s presence in energy transition commodities, alongside its established aluminium and copper operations.

“Acquiring Arcadium Lithium is a significant step forward in Rio Tinto’s long-term strategy, creating a world-class lithium business,” said CEO Jakob Stausholm.

In a press conference announcing the deal, Stausholm and Arcadium CEO Paul Graves highlighted the alignment of both companies’ growth strategies.

“Lithium is one of the cornerstone materials needed to support the energy transition, and with over 80% of its global production directed toward electric vehicles and energy storage, it is expected to remain the preferred material for battery energy storage due to its unmatched energy density and efficiency and owing to its fundamental chemical properties,” said Stausholm.

He added that lithium demand is expected to grow at double-digit rates until 2040, creating a market deficit by the end of the decade.

The acquisition comes at a time when spot lithium prices have dropped more than 80% from their peak, allowing Rio Tinto to capitalise on what it sees as substantial long-term upside.

“We have been patiently studying the sector for a long time, in fact, ever since we discovered Jadar 20 years ago. We believe now is the right time to acquire a premium lithium business,” said Stausholm.

With Arcadium, he believed Rio Tinto was creating a lithium business that would provide significant growth and value for its shareholders.

Graves echoed the sentiment, noting the deal represented a pivotal moment for both companies. “We are thrilled to be joining Rio Tinto,” he said, noting that Rio Tinto’s financial strength and disciplined capital allocation would provide the support needed to unlock Arcadium’s full potential.

In addition to accelerating project development, the combined entity would be better positioned to weather market fluctuations.

“Arcadium’s business is full of optionality. We can accelerate growth projects that will significantly enhance profitability over the next five years,” Graves explained.

Projects that Aracdium had previously slowed down due to financial constraints are expected to move forward under a faster pace under Rio Tinto’s ownership, bringing an additional 50 000 t of lithium carbonate and spodumene on line earlier than planned.

Arcadium is a vertically integrated player with expertise in lithium chemicals manufacturing and extraction from hard-rock mining, conventional brine extraction and direct lithium extraction sources. Its production capacity stands at 75 000 t lithium carbonate equivalent, with plans to more than double that by the end of 2028.

The deal, approved by both companies’ boards, will be implemented via a scheme of arrangement and is expected to close by mid-2025.

Graves commented that the $5.85-a-share transaction, which was a premium of 90% to its closing price of $3.08 a share on October 4, reflects a fair long-term value for the business.

“The transaction represents tremendous value for our shareholders, our employees, our customers and host nations around the world/ Rio Tinto’s proposal offers our shareholders cash certainty today at a very attractive price against the inherent risks associated with the delivery of our business.”

He said the agreement demonstrated the value in what Arcadium, and its predecessor companies, have built over many years.

Arcadium operates across Argentina, Australia, Canada, China, Japan, the UK and the US, with 2 400 employees.