Australia (Commonwealth) _ The world’s second-largest mining and metals conglomerate, Rio Tinto Group, a British-Australian multinational, said that it has submitted a non-binding takeover bid for Arcadium Lithium.
Rio stated on Monday, October 7, that there was no guarantee that a deal would be reached with the US miner. Worth about US$3.3 billion, Arcadium acknowledged that it had been contacted. The businesses withheld all financial information.
Since the beginning of the year, lithium stockpiles have been in decline due to a glut of the essential battery element and a pause in demand from manufacturers of electric vehicles. Due to Arcadium’s poor performance relative to its contemporaries, there have been rumors of a takeover for a few months.
Early trading saw a 50% increase in Australian-listed Arcadium depository receipts, the biggest increase since the metal’s December IPO. Since Sydney was closed on Monday due to a holiday, the move is probably made worse by light trade volumes.
Rio should purchase Arcadium as soon as July, according to Citigroup. Analyst Paul Taggart noted at the time that the miner was selling “well below replacement value” and that it would be less expensive to buy the company than to create a new portfolio of high-quality lithium assets.
“Purchasing Arcadium could be more cost-effective for businesses seeking scale, first quartile costs (brine), and chemical expertise positioned for IRA tailwinds than attempting to find and develop chemicals capability,” according to Taggart.
Rio would need to gain the support of the Arcadium board and shareholders in order to close any deal.
A possible purchase would be extremely opportunistic and “need a large premium to realize fair valuation for the business,” Blackwattle Investment Partners portfolio managers Tim Riordan and Michael Teran stated in a letter to the board of Arcadium on Saturday. The letter states that the Sydney-based company is an investor in Arcadium.
The global lithium market appears to have bottomed, and any sale price should be close to US$8 billion, according to Riordan and Teran. “The timing of this potential sale could not be at a more value destructive period for shareholders,” they said.
In 1873, a group of businessmen established Rio Tinto when they purchased a mine complex on the Rio Tinto in Huelva, Spain, from the Spanish government. It has expanded as a result of numerous mergers and acquisitions. While its main concentration is mineral extraction, it also engages in considerable refining operations, especially with regard to bauxite and iron ore. Its dual head offices are located in Melbourne, Australia, and London, England.
The Australian Securities Exchange (ASX 200 index component) and the London Stock Exchange (FTSE 100 index component) trade Rio Tinto as a dual-listed business. The New York Stock Exchange also trades the American depositary shares of Rio Tinto’s British division, thereby listing it on three major stock markets. The 2020 Forbes Global 2000 ranked it as the 114th-largest publicly traded corporation in the world.
Rio Tinto destroyed a sacred cave in Juukan Gorge, Western Australia, in May 2020 in order to expand the Brockman 4 mine. The cave, believed to be the only inland site in Australia to show signs of continuous human occupation through the last Ice Age, contained evidence of 46,000 years of continuous human occupation. Following an apology from the company for the demolition, CEO Jean-Sébastien Jacques resigned.
Rio Tinto has faced heavy criticism for the effects of their mining operations on the environment from both the Norwegian government and environmental groups. The Government Pension Fund of Norway removed it from its investment portfolio due to allegations of serious environmental harm associated with its involvement in the Grasberg mine in Indonesia.
Academic observers have also voiced concerns about Rio Tinto‘s activities in Papua New Guinea, claiming they contributed to the Bougainville separatist issue. The UK’s Serious Fraud Office declared in July 2017 that it was investigating the company’s business dealings in Guinea, raising concerns of corruption.
The firm owns its mining operations through a convoluted network of completely and partially owned companies. It operates on six continents, with the majority of its activities being centered in Australia and Canada.
The management authority of Rio Tinto is centralized in a single senior management group headed by an executive committee and board of directors under the terms of the company’s dual listing structure.
