Rio Tinto Lithium will take over Rio's $2.5 billion Rincon project in Argentina, but not its controversial Jadar lithium project in Serbia.
Anglo-Australian mining giant Rio Tinto plans to create a standalone lithium division after it closes its $6.7 billion acquisition of Arcadium Lithium, according to an internal memo seen by Reuters .
The plan reflects how closely Rio CEO Jakob Stausholm and his management team believe lithium is tied to the company’s future and the high value they place on Arcadium’s engineers as part of the deal.
Arcadium shareholders approved the sale last month and closing is expected in July.
The new company, Rio Tinto Lithium, will take over Rio's $2.5 billion Rincon de Rio project in Argentina, but not its controversial Jadar lithium project in Serbia.
This is to "ensure we have a laser focus on successful integration once the transaction is complete," Rio's Stausholm told employees in the memo.
The operation is Rio's largest in more than a decade.
Given that lack of familiarity with integrating an entire company, Rio executives plan to take over Arcadium slowly out of fear that a forced integration of the lithium producer could lead to a talent outflow that would negate the value of the deal, according to two people familiar with the matter.
Paul Graves, Arcadium's chief executive and former Goldman Sachs banker, is expected to run the lithium operations from New York.
LOGIC OF THE OPERATION
The deal will make Rio the world's third-largest producer of lithium, a metal used to build batteries for electric vehicles and many electronic devices, just as demand is expected to surge later this decade after a recent supply glut.
Already the world's largest producer of iron ore and a major copper producer, Rio is transforming itself into a processor of high-end, low-carbon minerals needed to power the energy transition.
Minerales de Río’s current division has struggled in recent years to win approval for its planned lithium project in Serbia due to opposition from local people and environmental groups. Meanwhile, it has expanded plans to produce the battery metal at its Rincón project and is on the shortlist to partner with Chilean state miner Codelco on a new lithium project.
At Rincón, Rio produced its first metric ton of lithium in December using direct lithium extraction (DLE), an innovative process aimed at speeding up production that numerous rivals are trying to scale commercially. Still, that milestone took three years.
The Minerals division also produces diamonds, boron and titanium dioxide, a white pigment used in food and consumer goods.
Arcadium has about 2,400 employees in nine countries. About 84% of its revenue comes from Asia – the global center of lithium demand – giving it growth potential as electric vehicle projects ramp up across the Western Hemisphere, especially those supported by the U.S. Inflation Reduction Act.
POSSIBLE MERGER WITH GLENCORE
On Thursday, it was reported that Glencore approached Rio Tinto late last year to discuss a possible merger between the two major copper producers. However, a source familiar with the matter reported that the talks are no longer active.
Talks between Rio, the world's second-biggest miner, and Glencore, one of the world's biggest producers of coal and base metals, were brief and led nowhere, the source added.
Meanwhile, Bloomberg News reported that the two were in early merger talks.
The merger between the companies could be the largest in the history of the mining industry. Their combined market value is around US$158 billion, surpassing that of BHP, which is US$126 billion.
Rio and Glencore declined to comment.
Global miners have been sizing each other up as they look for ways to bolster their position in metals such as copper, which will be in high demand as industries shift to cleaner forms of energy.
