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Rio Tinto Confirms Acquisition Offer for Arcadium Lithium
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Rio Tinto (RIO - Free Report) has confirmed that it has made a non-binding offer to acquire Arcadium Lithium (ALTM - Free Report) . RIO emphasized that there is no certainty that any transaction will come through. Arcadium Lithium is a global vertically integrated lithium chemical producer with low-cost assets and diversified high-quality product offerings.
Arcadium Lithium’s Strategic Plans Offer Potential for RIO
Arcadium Lithium was created in January 2024 following the merger between Livent and Allkem. It produces lithium hydroxide, a key component for the manufacture of lithium greases, dyes, resins and many specialty applications. Its products are also used in producing polymers in a wide range of other applications from fuel-efficient “green” tires to stronger, more flexible adhesives and other pharmaceutical applications.
The company has operations across the world, with facilities and projects in Argentina, Australia, Canada, China, Japan, the United Kingdom and the United States.
Arcadium Lithium expects 25% higher combined lithium carbonate and lithium hydroxide volumes in 2024 and 2025 from expansion projects at Fénix and Olaroz that have already been completed and are in operation. At its Investor Day, held on Sept. 19, the company outlined two waves of expansions across its large, high-quality and low-cost assets in Argentina and Canada.
The first wave of the four existing projects is expected to be completed by 2028, which will take its sales volume to 140 Lithium Carbonate Equivalents (LCE) in 2028 from 75 LCE in 2025. Revenues are expected to witness a Compound Annual Growth Rate (CAGR) of 4% to $2.7 billion in 2028 from 2025 base levels.
Arcadium Lithium expects to deliver $1.3 billion in adjusted EBITDA by 2028, witnessing a 34% CAGR from 2025. Margins will be supported by low-cost positions and multi-year customer agreements, higher volumes from expansion and pricing growth. EBITDA margin is projected to reach 48% in 2028, highlighting a 1000 basis point expansion from 2025.
The second wave of projects that are in the development and planning stage will likely aid Arcadium Lithium in increasing production capacity by a further 125,000 metric tons (LCE) to 295,000 metric tons (LCE) total by 2028 and beyond.
Rio Tinto’s Growing Lithium Portfolio
Lithium is a critical element necessary for a wide spectrum of applications. Lithium prices have declined 21.76% so far this year amid robust supply growth in key producing countries. Shares of Arcadium Lithium have lost 59% year to date.
Considering that lithium is expected to play an essential part in the transition to a low-carbon, clean-energy economy, the demand for the metal is expected to grow in the years to come.
Rio Tinto is working on building its lithium portfolio to capitalize on the rising demand for batteries and electric vehicles. Arcadium Lithium, with its top-tier assets, a wide range of products, focus on innovation, flexible network and solid growth plan, will play a key part in Rio Tinto’s growth plans.
In 2022, RIO acquired the Rincon lithium project in Argentina. Rincon is on track for the first lithium production from the starter plant by the end of 2024. The company also owns the Jadar project in Serbia. The project was put on hold due to environmental protests. However, Serbia’s top court lifted the ban in July 2024.
The Jadar Project will now be subject to stringent environmental requirements in compliance with Serbia and EU regulations, including having to progress through an extended phase of legal, EIA and permitting procedures, as well as public consultation, and business assessments, before a final investment decision is made on its construction . The Jadar project has the potential to be a world-class lithium-borates asset.
Rio Tinto Stock’s Price Performance
In the past year, shares of Rio Tinto have gained 13.7% compared with the industry’s 7.3% growth.
Image Source: Zacks Investment Research
RIO’s Zacks Rank and Stocks to Consider
Rio Tinto currently carries a Zacks Rank #4 (Sell).
The Zacks Consensus Estimate for Carpenter Technology’s fiscal 2025 earnings is pegged at $6.06 per share. The consensus estimate for earnings has moved 17% north in the past 60 days. It has an average trailing four-quarter earnings surprise of 15.9%. CRS’ shares have gained 136% in a year.
The consensus estimate for Idaho Strategic Resources’ fiscal 2024 earnings is pegged at 72 cents per share. The consensus estimate for earnings has moved up 167% in the past 60 days. It has an average trailing four-quarter earnings surprise of 116.6%. IDR’s shares have soared 252% in a year.
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Rio Tinto Confirms Acquisition Offer for Arcadium Lithium
Rio Tinto (RIO - Free Report) has confirmed that it has made a non-binding offer to acquire Arcadium Lithium (ALTM - Free Report) . RIO emphasized that there is no certainty that any transaction will come through. Arcadium Lithium is a global vertically integrated lithium chemical producer with low-cost assets and diversified high-quality product offerings.
Arcadium Lithium’s Strategic Plans Offer Potential for RIO
Arcadium Lithium was created in January 2024 following the merger between Livent and Allkem. It produces lithium hydroxide, a key component for the manufacture of lithium greases, dyes, resins and many specialty applications. Its products are also used in producing polymers in a wide range of other applications from fuel-efficient “green” tires to stronger, more flexible adhesives and other pharmaceutical applications.
The company has operations across the world, with facilities and projects in Argentina, Australia, Canada, China, Japan, the United Kingdom and the United States.
Arcadium Lithium expects 25% higher combined lithium carbonate and lithium hydroxide volumes in 2024 and 2025 from expansion projects at Fénix and Olaroz that have already been completed and are in operation. At its Investor Day, held on Sept. 19, the company outlined two waves of expansions across its large, high-quality and low-cost assets in Argentina and Canada.
The first wave of the four existing projects is expected to be completed by 2028, which will take its sales volume to 140 Lithium Carbonate Equivalents (LCE) in 2028 from 75 LCE in 2025. Revenues are expected to witness a Compound Annual Growth Rate (CAGR) of 4% to $2.7 billion in 2028 from 2025 base levels.
Arcadium Lithium expects to deliver $1.3 billion in adjusted EBITDA by 2028, witnessing a 34% CAGR from 2025. Margins will be supported by low-cost positions and multi-year customer agreements, higher volumes from expansion and pricing growth. EBITDA margin is projected to reach 48% in 2028, highlighting a 1000 basis point expansion from 2025.
The second wave of projects that are in the development and planning stage will likely aid Arcadium Lithium in increasing production capacity by a further 125,000 metric tons (LCE) to 295,000 metric tons (LCE) total by 2028 and beyond.
Rio Tinto’s Growing Lithium Portfolio
Lithium is a critical element necessary for a wide spectrum of applications. Lithium prices have declined 21.76% so far this year amid robust supply growth in key producing countries. Shares of Arcadium Lithium have lost 59% year to date.
Considering that lithium is expected to play an essential part in the transition to a low-carbon, clean-energy economy, the demand for the metal is expected to grow in the years to come.
Rio Tinto is working on building its lithium portfolio to capitalize on the rising demand for batteries and electric vehicles. Arcadium Lithium, with its top-tier assets, a wide range of products, focus on innovation, flexible network and solid growth plan, will play a key part in Rio Tinto’s growth plans.
In 2022, RIO acquired the Rincon lithium project in Argentina. Rincon is on track for the first lithium production from the starter plant by the end of 2024. The company also owns the Jadar project in Serbia. The project was put on hold due to environmental protests. However, Serbia’s top court lifted the ban in July 2024.
The Jadar Project will now be subject to stringent environmental requirements in compliance with Serbia and EU regulations, including having to progress through an extended phase of legal, EIA and permitting procedures, as well as public consultation, and business assessments, before a final investment decision is made on its construction . The Jadar project has the potential to be a world-class lithium-borates asset.
Rio Tinto Stock’s Price Performance
In the past year, shares of Rio Tinto have gained 13.7% compared with the industry’s 7.3% growth.
Image Source: Zacks Investment Research
RIO’s Zacks Rank and Stocks to Consider
Rio Tinto currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks from the basic materials space are Carpenter Technology Corporation (CRS - Free Report) and Idaho Strategic Resources (IDR - Free Report) . Each stock presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Carpenter Technology’s fiscal 2025 earnings is pegged at $6.06 per share. The consensus estimate for earnings has moved 17% north in the past 60 days. It has an average trailing four-quarter earnings surprise of 15.9%. CRS’ shares have gained 136% in a year.
The consensus estimate for Idaho Strategic Resources’ fiscal 2024 earnings is pegged at 72 cents per share. The consensus estimate for earnings has moved up 167% in the past 60 days. It has an average trailing four-quarter earnings surprise of 116.6%. IDR’s shares have soared 252% in a year.