Zhongtong Finance learned that the world's second largest mining company, Rio Tinto (RIO.US), has confirmed that it has made a non-binding acquisition offer to Arcadium Lithium (ALTM.US). Rio Tinto stated in a declaration on Monday that it is uncertain whether it will reach any agreement with the American mining company. Arcadium Lithium, valued at approximately $3.3 billion, confirmed in another statement that there had been contacts with the company.

Since the beginning of this year, global lithium inventories have been sluggish. With oversupply and low demand from electric auto manufacturers, the price of this crucial battery metal, lithium, has plummeted. Arcadium Lithium has been underperforming compared to its peers, sparking speculation for months about the company being acquired.

Citigroup had previously suggested Rio Tinto's acquisition of Arcadium Lithium. Citigroup analyst Paul Taggart wrote in July that the miner's stock price was "far below reset value," and the cost of acquisition was lower than establishing a new high-quality lithium asset portfolio. Taggart said, "For those seeking scale, cost (brine), and chemical expertise, buying Arcadium may be more economical than trying to discover and develop the chemical capability."

Any transaction would require Rio Tinto to win the support of Arcadium Lithium's board of directors and shareholders. Blackwattle Investment Partners portfolio managers Tim Riordan and Michael Teran wrote in a letter to Arcadium Lithium's board of directors last Saturday that a potential acquisition would be very speculative, 'requiring a significant premium to achieve a fair valuation of the business.' The letter stated that Blackwattle Investment Partners are investors in Arcadium Lithium.

Riordan and Teran wrote, 'For shareholders, the timing of this potential sale is the most disruptive.' They added that the global lithium market seems to have bottomed out, and any selling price should be close to $8 billion.