Rio battles high-bidding carmakers in hunt for lithium deals
Rio Tinto, one of the world’s most profitable companies, faces a tough battle to grow its lithium business, with some of the biggest carmakers prepared to pay a price it won’t match.
Lithium is Rio Tinto’s number one target for deals, but it’s found that companies such as Tesla seem willing to outbid it for a commodity that CEO Jakob Stausholm has branded “very expensive".
Tesla has been weighing a takeover of miner Sigma Lithium, Bloomberg News reported last month. But with a market value of $3.6-billion, Rio is not interested, a person familiar said at the time.
For Rio, it risks becoming a familiar theme. After two disastrous deals more than a decade ago almost sunk the company, Rio moved to a more conservative footing, focusing on funnelling record profits back to shareholders rather than looking to do deals.
Yet the conservative approach saw the company miss out on a host of opportunities in the past five years, from copper to lithium, as Chinese miners were willing to pay more. That approach has drawn criticism from its new chairperson, Dominic Barton, who has said that mergers and acquisitions reluctance came at a cost.
Rio is keen to grow in lithium, a key ingredient to make batteries for electric vehicles. So far, it’s bought a lithium mine in Argentina for $825-million, but plans for its flagship Jadar project in Serbia were dashed last year when the government blocked the development after thousands of protesters took to the streets to oppose it.
That has left the company looking to buy more lithium, asking the biggest investment banks for pitches on miners. Yet so far, it’s finding the asking prices high.
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