https://www.miningweekly.com

Rio is said to drop chase for $5bn lithium miner stake

11th January 2018

By: Bloomberg

  

Font size: - +

MELBOURNE – Rio Tinto Group has dropped out of the bidding for a stake in Soc. Quimica & Minera de Chile SA, one of the world’s top lithium producers, as it pursues other ways to capitalise on the electric-car boom, people familiar with the matter said.

Rio decided not to proceed with an offer for Nutrien’s 32% stake in Santiago-based SQM after studying information in a data room, according to the people. Other strategic bidders remain interested in the holding, one of the people said, asking not to be identified because the information is private. Nutrien’s interest in SQM is worth about $5-billion at current market prices.

Nutrien, the Canadian firm formed through Potash Corp of Saskatchewan Inc.’s recent merger with Agrium Inc., is selling the holding to meet a condition imposed by Indian regulators when approving that combination. Rio last year sought advice from firms including Credit Suisse Group AG on a possible bid for the stake, people familiar with the matter said in November.

Lithium is a key element used in electric-vehicle batteries, and prices have tripled since 2015. BHP Billiton, the world’s largest mining company, in September approved a $43-million project to start producing nickel sulphate, a product needed for lithium-ion batteries. Glencore plans to double its production of cobalt in the next two years, another key battery component.

Representatives for Rio Tinto, Nutrien and SQM declined to comment.

Rio closed little changed at A$79.25 in Sydney trading Thursday, as rival BHP Billiton fell along with Australia’s benchmark index. Lithium producers including Galaxy Resources also declined.

A decision to walk away from a possible SQM deal is likely to be welcomed by investors concerned over the prospect of hasty acquisitions, according to Peter O’Connor, a Sydney-based analyst with Shaw and Partners. It’s better that “Rio is keeping the powder dry,” he said in an e-mail.

London-based Rio is “well placed to benefit from the growth of EVs with our copper and aluminium offering,” though is continuing to evaluate other opportunities, CEO Jean-Sebastien Jacques told investors at a Sydney forum last month. The company is studying development of a Serbian lithium project that could meet 10% of global demand and begin production as soon as 2023.

Rio’s Ventures unit, led by former Xstrata dealmaker Andrew Latham, is also reviewing investments and partnerships in commodities that are outside Rio’s core portfolio and exposed to green technology. Nutrien CEO Jochen Tilk told analysts in October that the company had seen “significant interest” for its SQM stake as investors seek exposure to lithium assets amid expectations of a boom in electric vehicles.

Mining companies need to remain wary of buying assets at over-inflated prices as they seek to tap forecast rising demand for battery raw materials, Evy Hambro, who manages BlackRock’s World Mining Fund, said in a September interview. Investors are urging the biggest miners not to repeat past mistakes on failed acquisitions, and major deals to add lithium would risk eroding trust as the commodity is likely at the top of its price cycle, Sanford C. Bernstein Ltd. wrote in a January 5 report.

While Nutrien is the biggest shareholder in SQM, Chilean businessman Julio Ponce controls the company via voting shares held through a series of holding companies. Ponce, who is engaged in a bitter contractual dispute with Chilean authorities who are pushing him to relinquish control, last month agreed to certain conditions in order to restart talks on SQM’s main mining license in the Atacama salt flat.

Edited by Creamer Media Reporter

Comments

The functionality you are trying to access is only available to subscribers.

If you are already a subscriber, you can Login Here.

If you are not a subscriber, you can subscribe now, by selecting one of the below options.

For more information or assistance, please contact us at subscriptions@creamermedia.co.za.

Option 1 (equivalent of R125 a month):

Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format

Option 2 (equivalent of R375 a month):

All benefits from Option 1
PLUS
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.

Already a subscriber?

Forgotten your password?

MAGAZINE & ONLINE

SUBSCRIBE

RESEARCH CHANNEL AFRICA

SUBSCRIBE

CORPORATE PACKAGES

CLICK FOR A QUOTATION