Just over a decade ago, Rio Tinto (an Australian multinational) was reeling from the impact of unsuccessful investments such as the purchase of the aluminium group Alcan, which was at the top of the market, and then the ill-conceived acquisition of Riversdale Mining, a coal company focused on Mozambique.
After billions of dollars in charges, cost cuts and false starts, the mining company has returned to the fray of mergers and acquisitions, announcing this Monday, 14 October, the acquisition of Arcadium Lithium for 423.44 billion meticals (6.7 billion dollars).
According to the Mining Weekly news portal, the current investment is modest compared to previous ones. The cash deal is a significant and long-awaited expansion of Rio Tinto’s bet on lithium – a metal from which other diversified miners have shied away, concerned about geological abundance, among other factors.
After billions of dollars in charges, cost cuts and false starts, the mining company has returned to the fray of mergers and acquisitions, announcing this Monday, 14 October, the acquisition of Arcadium Lithium for 423.44 billion meticals (6.7 billion dollars)
The company’s move also marks a clear step towards acquisitive growth. ‘The development of the Arcadium acquisition took years to materialise,’ said Kaan Peker, an analyst at RBC Capital Markets, adding that ’eventually, as we’ve seen over the last few months, it was driven by a cyclical bottom in the price of lithium.’
The website reckons that the mining sector in general is only just beginning to shift its attention to expansion. For years after the last frenzy, the company’s shareholders demanded only better returns. While rival BHP Group tested deep water in 2022 with a move for OZ Minerals (it made an unsuccessful bid for Anglo American earlier this year), Rio Tinto held back.
People familiar with the matter have long pointed to cumbersome internal structures and a conservative approach by Rio Tinto CEO Jakob Stausholm, who was CFO until his predecessor was ousted in 2020, which provided an unexpected opening at the top. Public comments point to a lack of agreements.
Jakob Stausholm
Mining Weekly writes that the mining company has struggled with a problem that has affected other large peers such as BHP. ‘When most of the profit comes from the vast iron ore mines, it’s hard to find sufficiently profitable and sizeable additions to move the needle. Copper is expensive and hard to find. Metals that are friendly to the energy transition, such as lithium, used in batteries, tend to be smaller scale, with a lot of value in processing,’ writes the website.
In 2014, Rio Tinto announced the sale of the Benga coal mine and other projects in the province of Tete, in the centre of Mozambique, to the Indian group Coal Ventures Private Limited (ICVL). The Australian multinational sold its assets for the equivalent of 2.5 billion meticals (40.7 million dollars), well below the 183.2 billion meticals (2.9 billion dollars) it bought in 2011.
