Rio Tinto (ASX: RIO), one of the world’s largest mining companies, is reportedly in talks to acquire Arcadium Lithium (NYSE: ALTM). According to recent reports, Rio Tinto is considering a bid that would value Arcadium between $4 billion to $6 billion, signaling a significant push into the lithium sector.

The potential acquisition aligns with comments made by Rio Tinto’s CEO, Jakob Stausholm, who previously indicated the company’s interest in strengthening its lithium business. Stausholm highlighted Rio Tinto’s readiness for deals and preference for South American lithium extraction methods, particularly in Argentina and Chile.

Arcadium Lithium’s shares surged by more than 30% in pre-market trading following the news, reflecting investor excitement about the potential deal. The acquisition would position Rio Tinto as one of the world’s top producers of lithium, a crucial component in electric vehicle batteries.

However, the proposed deal has faced criticism from some Arcadium shareholders. Sydney-based Blackwattle Investment Partners argues that the reported $5.9 billion valuation significantly undervalues Arcadium and its future growth prospects. They suggest that a fair valuation should be closer to $8 billion, describing Rio Tinto’s bid as “highly opportunistic” given the current depressed state of lithium markets.

The timing of the potential acquisition is particularly noteworthy, as lithium stocks have struggled this year due to a supply glut and slower electric vehicle sales. Rio Tinto’s move could be seen as a strategic play to acquire assets during a market downturn, aligning with the company’s long-term vision for lithium demand.

Rio Tinto and Arcadium have remained tight-lipped about the negotiations. If successful, the acquisition would not only expand Rio Tinto’s lithium portfolio but also provide significant synergies with its existing Rincon project in Argentina.

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