With the $9.9bn takeover of Arcadium Lithium (LTM), RIO is now...

With the $9.9bn takeover of Arcadium Lithium (LTM), RIO is now going head first into being a lithium producer. One thing that RIO hasn't hidden is that they have been waiting for quite some time to acquire LTM, as the stock price slid from double of where it was value wise (taking into consideration that LTM was established late 2023 from the merger of Alkem and Livent). Say what you want about the future of lithium. One camp seems to think that the supply surplus, with all the new mines going online, will continue into the 2030's. The other camp (RIO included) seem to think the bottom is in and that the only way is up. Although different industries, assuming this takeover goes ahead at the agreed price, it values LTM at a P/E ratio of 10 (year rev of ~$1bn). In previous posts I've discussed that P/E ratio isn't always the best marker for mining stocks but for arguments sake here that places us at about $4.5bn (~$69) valuation if we take Bell Potters analysis.

In acquiring this company, RIO is taking a massive gamble, but one that represents roughly 6% of their market cap. They've acquired a behemoth with projects spanning 4 lithium carbonate mines in Argentina, 4 hydroxide conversion plants in the USA, China, Japan and Canada 2 spodumene mines in WA and Canada and Butyllithium plants in the USA, UK and China. Clearly a global supply chain that is emerging both upstream and downstream, highlighting how serious they are about becoming a massive contender to SQM, Albermarle, Ganfeng, Tianqi and our very own Aussie PLS.

But this is where things get interesting. RIO is potentially acquiring a project called LIOVIX. And the following is pulled from LTM's website;

"From our CLEAR Lab in North Carolina, we’ve introduced LIOVIX®, a unique printable formulation of lithium metal and other specialty materials that can improve the performance of lithium-ion batteries, reduce manufacturing costs and enable the next generation of battery technology."

Niobium is clearly on the radar of RIO, having been involved with Tali via their JV (ceased as of June) in the Arunta region. RIO has the distinct advantage over these other key lithium players in that its market cap is $175bn AUD, compared to $17.5bn AUD for SQM, $17.8bn AUD for Albermarle, $13.7bn AUD for Ganfeng, $11.7bn AUD for Tianqi and 8.79bn AUD for PLS. No doubt with its economies of scale, RIO will want to trump the competition and get on the front foot and push to be the worlds largest lithium producer, and its no better time than now (fire sale time in the lithium sector).

I did some more digging online to see whether the other big boys in the lithium space have Niobium on their radar. SQM has partnered up with a small explorer in WA called Tambourah Resources (TBM). Focus is on a tantalum/niobium anomaly, and while preliminary assays only showed trace amounts of Nb, with what looks like full assays still pending, it is clear that SQM is looking at ways to improve their lithium product. Bearing in mind they are a downstream producer as well. Ganfeng owns the Songshugang Tantalum and Niobium Mine project in China containing 63,591 tonnes of Nb at a grade of ~0.2%. Tianqi in their 2022 sustainability report mention a pilot program that was to take place in 2023 to extract niobium from one of their projects, meanwhile Albermarle and PLS make no mention of niobium online.

Although I have shared specific details above, the bigger picture is what is important here. Irrespective of the grades, these companies will find any means of attaining a competitive advantage over one another. Given that adding a small amount of Nb to a lithium battery, phenomenally improves its performance and longevity, it's only logical that Niobium will play a crucial role. Electric items are here to stay, and all the signs point towards niobium being a key linchpin in the development of the electric revolution.

In light of that, our recoveries and met work is chugging along nicely. What remains a crucial factor are the project economics. Once Paul can crunch the numbers and prove by way of PFS or DFS that the project can be started economically, its on like Donkey Kong. Those numbers are the final piece of the puzzle, for the big boys to feel comfortable to push for a TO. I would be willing to put my neck on the line and say that if our project was not in the middle of nowhere and was near existing infrastructure, a scheme of arrangement would already be in place and our beloved deposit would be gone.

On another note, and this was a thought that popped into my mind as I wrote the above and a conversation I was having with my grandparents today (yes.. I am probably one of the, if not the youngest contributor here), solar panels are generating over 11.2% of Australia's energy needs and year on year, installations are increasing at a rapid rate. Although this may not mean much to many of us, but most people who were previously ignorant about clean energy are all speaking about solar. Much like inflation has been the talk of the town this past year, as opposed to a few years back where the average young person could not tell you definitively what it was. What I hadn't considered before, nor had I seen here, was any discussion about the application of Nb in solar panels. This is where I came across this 2019 study.

In summary, the above study found that when a niobium oxide film with 3.5 sccm of oxygen flow was added to a solar cell, it resulted in films with better electrical properties. When a niobium oxide film is used, it helps the solar cell respond more quickly and consistently to changes in light and voltage. So, with low hysteresis, the solar cell's performance remains stable and predictable, allowing it to generate electricity more efficiently without the lag or unpredictability that can waste energy. It means the solar cell works better and more reliably with the niobium oxide layer. Now, I don't want to get carried away by one research paper, but this is yet another encouraging example and application for Nb when the project comes online, and it warrants getting more attention. I will be looking further into this as well as its quite interesting and also to get an understanding of how much cost this film adds if those cells are made at scale.

In full disclosure, I do not own any of the companies listed above, nor is any of this financial advice. This is not a cross promotion either. Just an increasing amount of coincidences that are stacking up.

Good luck to all.

PS