Rio Tinto has been holding talks to buy lithium miner Arcadium, three sources with direct knowledge of the negotiations said, a deal that would make Rio the third-largest producer of the electric vehicle battery metal.

Arcadium shares surged 36 per cent in extended trading on Friday.

Talks have been ongoing and continued in London this week during the LME Week conference, one of the sources said. An offer is expected to come in the near future, according to the second source. Talks are ongoing and may not necessarily result in a deal, the sources said.

Philadelphia-based Arcadium could be valued between $4 billion to $6 billion or higher, the third source said. None of the sources were authorised to discuss the negotiations publicly.

The deal would vault Rio into one of the world’s largest suppliers of the ultralight metal, behind only Albemarle and SQM, just as demand is expected to surge later this decade amid growing use of lithium-ion batteries for EVs and consumer electronics.

The recent slump in lithium prices, which is due in part to Chinese oversupply, has pushed Arcadium’s shares down more than 50 per cent since January, making it an attractive takeover target.

It was not immediately clear if a transaction would primarily include cash, stock or a mixture of both. Arcadium has selected two investment banks to handle its negotiations with Rio, according to the second source.

By buying Arcadium, Rio would gain access to lithium mines, processing facilities and deposits across four continents to fuel decades of growth, as well as a customer base that includes Tesla, BMW and General Motors.

Arcadium and Rio Tinto declined to comment.

The Anglo-Australian mining company is already one of the world’s largest producers of copper — used to make wiring, construction equipment, electronics and other devices — as well as iron ore and other metals.

Arcadium has around 2,400 employees across nine countries. Roughly 84 per cent of its revenue comes from Asia — the existing global centre for lithium demand — giving it growth potential as EV projects ramp up across the Western Hemisphere, especially those supported by the US Inflation Reduction Act.

Reuters