{"id":812109,"date":"2024-12-12T23:16:05","date_gmt":"2024-12-13T05:16:05","guid":{"rendered":"https:\/\/newsycanuse.com\/index.php\/2024\/12\/12\/rio-takes-step-toward-ma-redemption-with-6-7-billion-lithium-bet\/"},"modified":"2024-12-12T23:16:05","modified_gmt":"2024-12-13T05:16:05","slug":"rio-takes-step-toward-ma-redemption-with-6-7-billion-lithium-bet","status":"publish","type":"post","link":"https:\/\/newsycanuse.com\/index.php\/2024\/12\/12\/rio-takes-step-toward-ma-redemption-with-6-7-billion-lithium-bet\/","title":{"rendered":"Rio Takes Step Toward M&#038;A Redemption With $6.7 Billion Lithium Bet"},"content":{"rendered":"<p>Bitcoins <\/p>\n<article aria-labelledby=\"articleTitle\" data-wcm-id=\"36a32ccc-1880-47c1-8ffc-e64c5eedd6a7\">\n<header aria-label=\"Beginning of Article\">\n<div>\n<div>\n<p>A little over a decade ago, Rio Tinto Group was reeling from the impact of disastrous investments. First, the bruising top-of-the-market purchase of aluminum group Alcan Inc., and then the ill-conceived swoop for Mozambique-focused coal outfit Riversdale Mining Ltd. The commodities boom cooled, top managers were pushed out and writedowns piled up.<\/p>\n<div>\n<div>\n<p>Author of the article:<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" alt=\"bitcoins Bloomberg News\" src=\"https:\/\/secure.gravatar.com\/avatar\/2c61c569c35df1bfebdf8601ae03b90f?s=70&#038;d=mp\"  aria-labelledby=\"wire-company-name\" height=\"70\" width=\"70\"><\/p>\n<div>\n<p>Bloomberg News<\/p>\n<p>Paul-Alain Hunt<\/p>\n<\/div>\n<\/div>\n<p><span>Published Oct 11, 2024<\/span> \u00a0\u2022\u00a0 <span>4 minute read<\/span><\/p>\n<\/div>\n<\/div>\n<figure data-aqa=\"featured-image\"><picture><source media=\"(min-width: 1200px)\" srcset=\"https:\/\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2024\/10\/776213119.jpg?quality=90&#038;strip=all&#038;w=564&#038;h=423&#038;type=webp&#038;sig=XWF7HdZmbnuG7HYPj2VUxA, \nhttps:\/\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2024\/10\/776213119.jpg?quality=90&#038;strip=all&#038;w=1128&#038;h=846&#038;type=webp&#038;sig=ElmHoJdCN-1Pv_39a6hMMA 2x\" type=\"image\/webp\"><source media=\"(min-width: 1200px)\" srcset=\"https:\/\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2024\/10\/776213119.jpg?quality=90&#038;strip=all&#038;w=564&#038;h=423&#038;type=jpg&#038;sig=F1bpRwBPYXlYRkckgRZ0dA, \nhttps:\/\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2024\/10\/776213119.jpg?quality=90&#038;strip=all&#038;w=1128&#038;h=846&#038;type=jpg&#038;sig=tvia8xF8ykLrxgGRUinofQ 2x\" type=\"image\/jpeg\"><source media=\"(min-width: 768px)\" srcset=\"https:\/\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2024\/10\/776213119.jpg?quality=90&#038;strip=all&#038;w=472&#038;h=354&#038;type=webp&#038;sig=iz9Cu7smRfuEKJbw-1caTw, \nhttps:\/\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2024\/10\/776213119.jpg?quality=90&#038;strip=all&#038;w=944&#038;h=708&#038;type=webp&#038;sig=TxgUaoU8YIq6nHEiyTKJFg 2x\" type=\"image\/webp\"><source media=\"(min-width: 768px)\" srcset=\"https:\/\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2024\/10\/776213119.jpg?quality=90&#038;strip=all&#038;w=472&#038;h=354&#038;type=jpg&#038;sig=XzTcbicMcm7N5z1XmtfhAA, \nhttps:\/\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2024\/10\/776213119.jpg?quality=90&#038;strip=all&#038;w=944&#038;h=708&#038;type=jpg&#038;sig=ZMfN9aazk1caHg39sIloZg 2x\" type=\"image\/jpeg\"><source media=\"(max-width: 767px)\" srcset=\"https:\/\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2024\/10\/776213119.jpg?quality=90&#038;strip=all&#038;w=288&#038;h=216&#038;type=webp&#038;sig=_3GI8THX4QqeELgDxUdmqA, \nhttps:\/\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2024\/10\/776213119.jpg?quality=90&#038;strip=all&#038;w=576&#038;h=432&#038;type=webp&#038;sig=NlSdkYkKcgjwogZrh8PEVQ 2x\" type=\"image\/webp\"><img loading=\"lazy\" decoding=\"async\" alt=\"bitcoins Jakob Stausholm, chief executive officer of Rio Tinto Ltd., during a Bloomberg Television interview in New York, US, on Thursday, Sept. 26, 2024. Stausholm said that Rio Tinto Plc\u00a0aims to start churning out copper from a long-delayed mining project in Arizona by the end of the decade. Photographer: Victor J. Blue\/Bloomberg\" src=\"https:\/\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2024\/10\/776213119.jpg?quality=90&#038;strip=all&#038;w=288&#038;h=216&#038;sig=mxu1Be9w8Bxe91zdkEE2GA\" srcset=\"https:\/\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2024\/10\/776213119.jpg?quality=90&#038;strip=all&#038;w=288&#038;h=216&#038;sig=mxu1Be9w8Bxe91zdkEE2GA,\n                    https:\/\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2024\/10\/776213119.jpg?quality=90&#038;strip=all&#038;w=576&#038;h=432&#038;sig=ZH4MBGP5axbDVU4j43Auzw 2x\" height=\"750\" width=\"1000\"><\/picture><figcaption><span>Jakob Stausholm, chief executive officer of Rio Tinto Ltd., during a Bloomberg Television interview in New York, US, on Thursday, Sept. 26, 2024. Stausholm said that Rio Tinto Plc\u00a0aims to start churning out copper from a long-delayed mining project in Arizona by the end of the decade. Photographer: Victor J. Blue\/Bloomberg<\/span> <span>Photo by Victor J. Blue<\/span> \/<span>Bloomberg<\/span><\/figcaption><\/figure>\n<\/div>\n<\/header>\n<section>\n<p>(Bloomberg) \u2014 A little over a decade ago, Rio Tinto Group was reeling from the impact of disastrous investments. First, the bruising top-of-the-market purchase of aluminum group Alcan Inc., and then the ill-conceived swoop for Mozambique-focused coal outfit Riversdale Mining Ltd. The commodities boom cooled, top managers were pushed out and writedowns piled up.<\/p>\n<\/section>\n<section data-aqa=\"identity-sign-in\" data-async id=\"article-block\">\n<header>\n<div>\n<p><img decoding=\"async\" title=\"bitcoins\" alt=\"bitcoins Financial Post\" height=\"37\" loading=\"lazy\" src=\"https:\/\/dcs-static.gprod.postmedia.digital\/17.5.4\/websites\/images\/identity\/logo-identity-fp.svg\" width=\"280\"><\/p>\n<div>\n<p>THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLY<\/p>\n<p>Subscribe now to read the latest news in your city and across Canada.<\/p>\n<ul>\n<li>Exclusive articles from Barbara Shecter, Joe O&#8217;Connor, Gabriel Friedman, and others.<\/li>\n<li>Daily content from Financial Times, the world&#8217;s leading global business publication.<\/li>\n<li>Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.<\/li>\n<li>National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.<\/li>\n<li>Daily puzzles, including the New York Times Crossword.<\/li>\n<\/ul>\n<\/div>\n<div>\n<p>SUBSCRIBE TO UNLOCK MORE ARTICLES<\/p>\n<p>Subscribe now to read the latest news in your city and across Canada.<\/p>\n<ul>\n<li>Exclusive articles from Barbara Shecter, Joe O&#8217;Connor, Gabriel Friedman and others.<\/li>\n<li>Daily content from Financial Times, the world&#8217;s leading global business publication.<\/li>\n<li>Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.<\/li>\n<li>National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.<\/li>\n<li>Daily puzzles, including the New York Times Crossword.<\/li>\n<\/ul>\n<\/div>\n<div>\n<p>REGISTER \/ SIGN IN TO UNLOCK MORE ARTICLES<\/p>\n<p>Create an account or sign in to continue with your reading experience.<\/p>\n<ul>\n<li>Access articles from across Canada with one account.<\/li>\n<li>Share your thoughts and join the conversation in the comments.<\/li>\n<li>Enjoy additional articles per month.<\/li>\n<li>Get email updates from your favourite authors.<\/li>\n<\/ul>\n<\/div>\n<div>\n<p>THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.<\/p>\n<p>Create an account or sign in to continue with your reading experience.<\/p>\n<ul>\n<li>Access articles from across Canada with one account<\/li>\n<li>Share your thoughts and join the conversation in the comments<\/li>\n<li>Enjoy additional articles per month<\/li>\n<li>Get email updates from your favourite authors<\/li>\n<\/ul>\n<\/div>\n<\/div>\n<\/header>\n<div data-auth-component id=\"auth-screen-form\" aria-live=\"assertive\">\n<h2>Bitcoins Sign In or Create an Account<\/h2>\n<p><span><\/span><span>or<\/span><span><\/span><\/p>\n<\/div>\n<\/section>\n<section>\n<p>Article content<\/p>\n<\/section>\n<section>\n<p>Article content<\/p>\n<\/section>\n<section>\n<p>Article content<\/p>\n<p>Now \u2014 after billions in charges, cost cuts, plus several chief executives and multiple false starts \u2014 the miner has returned to the M&#038;A fray, announcing the agreed $6.7 billion acquisition of Arcadium Lithium Ltd. this week.<\/p>\n<p>Modest by comparison with past splurges, the all-cash deal is a significant and long-awaited expansion of Rio\u2019s bet on lithium, a metal other diversified miners have stayed away from, worried about geological abundance among other factors.<\/p>\n<p>It also marks a clear step back toward acquisitive growth.<\/p>\n<p>\u201cThe development of the Arcadium acquisition was years in the making,\u201d said Kaan Peker, analyst with RBC Capital Markets LLC. \u201cEventually, as we\u2019ve seen over the course of the last couple of months, it was driven by a cyclical bottoming of the lithium price.\u201d<\/p>\n<p>The mining sector across the board is only just beginning to shift its focus to expansion and deals. For years after the last frenzy soured, shareholders demanded only better returns. But while rival BHP Group tested the waters since 2022, with the move for OZ Minerals Ltd. \u2014 and eventually bid unsuccessfully for Anglo American Plc, earlier this year \u2014 Rio has held back.<\/p>\n<\/section>\n<div aria-labelledby=\"FinancialPostTopStories1746793231111178673234863714205696\" data-account-id=\"b9d3df2fccd108b5eff3c44f573b2cd6\" data-aqa=\"widget-newsletter\" data-newsletter=\"single\" data-newsletter-component data-target-list=\"FP_HeadlineNews\" data-widget=\"newsletter\">\n<p>By signing up you consent to receive the above newsletter from Postmedia Network Inc.<\/p>\n<\/div>\n<section>\n<p>Article content<\/p>\n<\/section>\n<section>\n<p>Article content<\/p>\n<p>People familiar with the matter have long pointed to cumbersome internal structures and a conservative approach from Chief Executive Officer Jakob Stausholm, who was chief financial officer until the 2020 ousting of his predecessor provided an unexpected opening at the top. Public comments pointed away from deals.<\/p>\n<p>But it\u2019s also true that the miner struggled with an issue that has dogged other large peers like BHP. When profit comes overwhelmingly from vast iron ore mines, it is hard to find additions that are lucrative \u2014 and sizeable \u2014 enough to move the needle. Copper is expensive and hard to find. Energy-transition friendly metals like lithium, used in batteries, tend to be smaller scale, with plenty of value in the processing and not just extraction.\u00a0<\/p>\n<p>Even with China\u2019s sputtering economy, the profit margin for Rio\u2019s Pilbara iron ore operations was 67% in the first half of 2024.<\/p>\n<p>Battery Bet<\/p>\n<p>Rio has significant additional copper and iron production due from Oyu Tolgoi in Mongolia and Simandou in Guinea, respectively. Still, its answer to the question of where new, greener growth will come from has been lithium.\u00a0<\/p>\n<\/section>\n<section>\n<p>Article content<\/p>\n<p>The path has not been smooth. Efforts to invest in new materials through private equity-inspired unit Rio Ventures, starting in 2017, went virtually nowhere and attempts to buy into lithium heavyweight SQM around that time were also thwarted. Projects too have stumbled, with Jadar in Serbia, Stausholm\u2019s early bet, turning for a time into a local cause celebre.<\/p>\n<p>\u201cThere were some people in Rio that were very disappointed they didn\u2019t buy the stake in SQM. If you look back at Rio in those days they weren\u2019t really ready,\u201d said George Cheveley, portfolio manager at Ninety One UK Ltd.\u00a0<\/p>\n<p>\u201cSince Jakob became CEO, he has been fixing internal problems and projects that were stuck. Operationally, we\u2019ve seen them hit their targets. Now to be moving into lithium and getting back to M&#038;A is the obvious next step. You can see him rebuilding the company back to where it was.\u201d<\/p>\n<p>Rio completed its $825 million purchase of the Rincon project in Argentina in 2022, but it was the collapse of lithium prices since the end of that year that opened up more avenues for M&#038;A, with many new suppliers struggling to stay afloat.\u00a0<\/p>\n<\/section>\n<section>\n<p>Article content<\/p>\n<p>The second-largest miner has seized the opportunity, and investors are cautiously welcoming a move that brings future production \u2014 Arcadium is projected to be the world\u2019s third-largest producer by 2030 \u2014 but also technological nous, particularly in direct lithium extraction, or DLE, which could turbocharge output.<\/p>\n<p>\u201cWe are happy Rio\u2019s CEO Jakob Stausholm showed discipline and waited for the right time; makes a lot of sense and Arcadium is a nice add-on,\u201d said Matthew Haupt, a portfolio manager at Wilson Asset Management Ltd. in Sydney, who holds both Rio and Arcadium.<\/p>\n<p>Others echoed the sentiment \u2014 even with a premium to the undisturbed price of 90%, hefty despite the halving of Arcadium shares this year.<\/p>\n<p>\u201cYou could almost say it\u2019s akin to what BHP did last year when they bought OZ Minerals. Go out there, do a deal that is a small percentage of your market cap, execute it and prove that you can buy well,\u201d said Barrenjoey analyst Glyn Lawcock. \u201cThe question now is whether there\u2019s more to come down the pipe after this.\u201d<\/p>\n<p>Still, Rio has work to do when it comes to convincing all its investors that it\u2019s ready to get back to spending.<\/p>\n<p>\u201cIf they indulge in large scale M&#038;A, it\u2019ll be a negative thing,\u201d said Prasad Patkar at Platypus Asset Management. \u201cI\u2019m a little bit more comfortable with this transaction than I would\u2019ve been with anything larger. Or any top-of-the-market stuff.\u201d<\/p>\n<p>A Rio spokesman pointed to Stausholm\u2019s comments this week committing to remain disciplined in capital allocation, but declined to comment further.<\/p>\n<p>\u2014With assistance from Sybilla Gross and Jack Farchy.<\/p>\n<\/section>\n<section>\n<p>Article content<\/p>\n<\/section>\n<p> Bloomberg News <a href=\"https:\/\/financialpost.com\/pmn\/business-pmn\/rio-takes-step-toward-ma-redemption-with-6-7-billion-lithium-bet\" class=\"button purchase\" rel=\"nofollow noopener\" target=\"_blank\">Read More<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>A little over a decade ago, Rio Tinto Group was reeling from the impact of disastrous investments. First, the bruising top-of-the-market purchase of aluminum group Alcan Inc., and then the ill-conceived swoop for Mozambique-focused coal outfit Riversdale Mining Ltd. The commodities boom cooled, top managers were pushed out and writedowns piled up. Author of the<\/p>\n","protected":false},"author":1,"featured_media":812110,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1409,25303],"tags":[11476],"class_list":["post-812109","post","type-post","status-publish","format-standard","has-post-thumbnail","category-takes","category-toward","tag-bitcoins"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/newsycanuse.com\/index.php\/wp-json\/wp\/v2\/posts\/812109","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/newsycanuse.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/newsycanuse.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/newsycanuse.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/newsycanuse.com\/index.php\/wp-json\/wp\/v2\/comments?post=812109"}],"version-history":[{"count":0,"href":"https:\/\/newsycanuse.com\/index.php\/wp-json\/wp\/v2\/posts\/812109\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/newsycanuse.com\/index.php\/wp-json\/wp\/v2\/media\/812110"}],"wp:attachment":[{"href":"https:\/\/newsycanuse.com\/index.php\/wp-json\/wp\/v2\/media?parent=812109"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/newsycanuse.com\/index.php\/wp-json\/wp\/v2\/categories?post=812109"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/newsycanuse.com\/index.php\/wp-json\/wp\/v2\/tags?post=812109"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}