Rio Tinto Cautions Against Takeover Fever After Lithium’s Dramatic Price Slump – by Annie Lee and James Fernyhough (Bloomberg News – May 5, 2023)

(Bloomberg) — Lithium’s dramatic price slump has mining heavyweights chasing takeovers of companies with early stage or pre-production projects. But one giant is warning that offering high premiums for smaller miners comes with risks.

Rio Tinto Group Chief Executive Officer Jakob Stausholm said he’s “cautious” about acquisitions at current valuations, despite the world’s second-biggest miner wanting to grow its nascent lithium business.

“It’s very difficult to justify to go in and buy at these high prices, unless you already know you can sell the lithium at a high price,” he told reporters in Perth on Thursday. “We have to make sure that it’s also in the interest of our shareholders and not just the selling shareholders.”

Prices of lithium carbonate, used in EV batteries, have plunged 70% from a peak in November. While that’s had a negative impact on the share valuations of some smaller players, companies are increasingly prepared to offer chunky premiums to grab a slice of the market for what promises to be one of the world’s hottest commodities.

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