Rio Tinto has finalized a significant $6.7 billion acquisition of Arcadium Lithium, positioning itself as the third-largest lithium producer globally, a crucial element in electric vehicle batteries.

The London-based mining company will pay $5.85 per share in cash, representing a 90% premium over Arcadium Lithium’s last closing price of $3.08 on October 4, before the announcement of takeover discussions.

This acquisition provides Rio Tinto with access to lithium mines and processing facilities across Argentina, Australia, Canada, and the United States, along with a clientele that includes major automotive companies like Tesla, BMW, and General Motors. Arcadium, which employs 2,400 individuals, was created through the merger of American lithium technology firm Livent and Australian-based Allkem.

Arcadium shares have seen a 39% decline this year, largely attributed to a sharp drop in lithium prices caused by oversupply from China and reduced demand for new electric vehicles, making the company more susceptible to being targeted for acquisition.

Jakob Stausholm, the CEO of Rio Tinto, remarked that while the future of lithium pricing is challenging to forecast in the near term, demand is projected to rise at an annual rate of 10% until 2040, potentially leading to market shortages.

Stausholm emphasized that this strategic move allows Rio Tinto to tap into a high-growth market at an optimal moment in the commodity cycle.

Paul Graves, CEO of Arcadium Lithium, expressed that the offer was “compelling,” asserting that it reflects a fair long-term valuation for the company and mitigates shareholder risks associated with market fluctuations and project execution.

Currently, Rio Tinto has two lithium projects, Jadar in Serbia and Rincon in Argentina, but production timelines for both remain uncertain. Jadar has faced multiple delays due to environmental opposition, with an expected combined annual output of approximately 58,000 tonnes from both sites.

In the first half of the year, Arcadium produced 20,100 tonnes of lithium hydroxide and carbonate and 53,500 tonnes of spodumene concentrate, a primary lithium source.

The proposed $6.7 billion offer exceeds the $4.6 billion estimated by RBC Capital when the deal was initially confirmed on Monday.

However, Blackwattle Investment Partners, a stakeholder in Arcadium, criticized the offer as “opportunistic,” claiming the company’s assets are irreplaceable. They intend to vote against the sale unless the valuation approaches $8 billion.

Stausholm dismissed assertions that the bid was opportunistic, noting that investors had already expressed their intent by selling shares before the acquisition news became public.

Arcadium is anticipated to represent approximately 5% of Rio Tinto’s overall capital expenditure forecast of up to $10 billion for 2025 and 2026.

Stausholm reiterated that the company plans to maintain its dividend policy, distributing 40% to 60% of earnings to shareholders.

As the mining sector seeks to acquire essential materials for the transition to sustainable energy, several companies have engaged in significant deals. In May, BHP made an unsuccessful £39 billion bid for Anglo American to bolster its copper resources, which are pivotal in green technologies like electric vehicles and wind power.

Stausholm acknowledged that while the copper market continues to be appealing, the high premiums on available assets pose challenges for future acquisitions.

At midday in New York, Arcadium Lithium shares rose by 31% to $5.55, while Rio Tinto shares closed up 0.1% at £50.48 in London.