Rio Tinto Group, the world’s second-largest mining group, is to buy U.S. lithium producer Arcadium Lithium Plc. The British-Australian group is putting 6,7 billion dollars, or 6,1 billion euros, on the table for the acquisition.

This is Rio Tinto’s largest deal in 17 years. With the acquisition, the group is betting heavily on lithium, a crucial material for batteries in electric cars and thus important for today’s energy transition.

Nearly double of the share price

Arcadium Lithium Plc, one of the world’s largest lithium producers, operates in Argentina, China, Canada, and Australia and employs 2,400 people. The company was formed only last year through the merger of Argentinian Allkem and US miner Livent.

Lithium is a crucial source for rechargeable batteries in EVs, but falling demand for electric cars and overproduction in China have made the metal much cheaper in recent months.

Rio Tinto will pay $5,85 per share. That’s nearly double the share price on October 4, before the group confirmed it had approached Arcadium.

Under fire in Serbia

In recent months, Rio Tinto has faced a storm of protests as it seeks to mine lithium in the Jadar Valley in western Serbia. The United States and the European Union support the project, which urgently needs lithium to meet its climate goals.

Neighbors fear the mine, which is supposed to become Europe’s largest lithium mine, will pollute the air and water. In August, the project caused huge street protests against President Aleksandar Vucic.

Experts say the Rio takeover is a good move primarily because Arcadium’s expertise in direct lithium extraction (DLE) technologies through ILiAD. This technology is more environmentally friendly because it uses less energy, water, and land to extract lithium while recovering a significantly higher proportion of lithium than conventional technologies.

The process is much faster than traditional mining through evaporation ponds and open pit mines.

Demand will only rise

China currently accounts for 72% of lithium carbonate production. According to a recent Bloomberg report, there will be a shortage of lithium starting in 2025, and lithium supply will increase much slower than demand in the future.

According to a report by The Hague Center for Strategic Studies, if Europe is to achieve its goal of carbon neutrality by 2050, it will need 60 times more lithium by that year than what it imported from China and elsewhere in 2020.