Rio bid for Arcadium sees lithium roar back baby!

If the all-important critical mineral, lithium – which has been virtually unloved by everyone in the market these past 18 months – could speak (stay with me here...), how would it sound and what would it say to a sceptical market?

Well, after this week’s notable ASX wheelings and dealings, we here at Bulls N’ Bears can almost hear its dulcet tones. In fact, it sounds a bit like legendary American small-screen icon Frank Costanza’s voice and his now immortal scream on the Seinfeld sit-com … “I’m back baby!”

While there has been a growing market expectation for lithium – an important ingredient in electric-vehicle (EV) batteries and a silvery-white metal set to play a vital role in a global clean-energy transition – to soon bounce out of the doldrums, this week may have produced the first genuine green-shoot signs of it becoming a reality.

And it largely seemed to be inspired by a now-confirmed takeover bid by one of mining’s absolute big dogs, Rio Tinto, for Arcadium Lithium. And the latter is no small fish itself, boasting a market capitalisation of more than US$3 billion (AU$4.45 billion) before the market-shaking news broke.

Rio disclosed after Wednesday’s close that it had indeed made a counter-cyclical bid for the lithium major, taking advantage of the recent poor sentiment towards the sector.

Now, Arcadium’s market cap has been blown out of the water after Rio valued the firm at US$6.7 billion (AU$9.9 billion) with its offer of US$5.85 (AU$8.71) per share for the lithium producer. An eye-popping volume of almost 61 million shares were traded on Thursday after the takeover bid was revealed.

Rio’s intent to become a serious player in the lithium space has provided a clean-energy powered return for Arcadium shares across the week of more than 97 per cent on last Friday’s close of $4.18 to a high of $8.25. Based on yesterday’s close of $8.20, still at about a 6 per cent discount to the local currency-converted bid price, it now equates to about $8.71 a share.

The impressive jump is sure to have put Arcadium shareholders in a state of serenity – maybe a sort of untroubled, tranquil calm, if you will – minus the screaming from Frank’s mantra that was intended to keep him calm and help him to not lose his cool.

Arcadium was born from the merger of two of the industry’s biggest players, United States lithium refiner Livent and Australian firm Allkem.

Adding to lithium’s first baby steps (apologies) in its potential comeback, Trading Economics –which hosts one of the leading commodities price data websites – showed the critical mineral’s first uptick for the lithium carbonate price in nearly six months, with it up by about 7 per cent so far in October.

Having said all that, Arcadium was not our top performer this week. This week’s Runner of the Week honour went to another lithium company, Kali Metals – which was itself born from corporate manoeuvres when it was spun out of ASX-listed Kalamazoo Resources with the lithium assets attached. Kalamazoo remains a major shareholder in the business with a stake of more than 18 per cent.

In a further boost to the asset mix of the lithium junior, TSX-listed Karora Resources also added its Higginsville lithium project into the spin-out, giving Kali a combined 3800 square kilometres of tenements, including about 1600sq km in the East Yilgarn lithium corridor that is home to Mineral Resources’ 50 per cent-owned Mount Marion lithium mine, which remains in production.

Kali launched onto the ASX boards in early January this year after raising its maximum subscription of $15 million through the shares that were issued in an initial public offering (IPO) and priced at 25c, before they rocketed to hit 89c on its third day of trading.

In a case of déjà vu, the shares again shot to the top of the leader board this week upon news of the company boosting its existing joint venture (JV) agreement with major Chilean lithium producer Sociedad Química y Minera (SQM) by acquiring several strategic Pilbara tenements and adding them into the partnership mix. The additional land-grab consists of tenure near its DOM’s Hill and Pear Creek prospects and increases its ground area in the region by a prospective 129sq km.

SQM has agreed to spend $500,000 by mid-December next year to retain its existing 30 per cent interest in the Pilbara tenements and ratchet up its agreed spend by a further $1 million to now total $4.25 million by mid-December 2026 to earn a 50 per cent stake across the expanded land package. Kali will retain 100 per cent of its Marble Bar project.

The share price of Kali’s often thinly-traded stock surged on the news, leaping from an 11.5c close last Friday to touch a high of 27c, producing a stellar near 135 per cent gain to earn our title of top performer this week. While volumes didn’t reach the levels seen in January after its initial listing on the ASX boards, it hit nine-month highs, with 4.5 million units changing-hands on the day of the reveal.

Rimfire Pacific Mining made the market eventually sit up and take notice after its news last Friday that step-out drilling had returned high-grade cobalt with strong associated anomalous copper at its Bald Hill prospect that sits about 30km west of the mining town of Broken Hill in NSW. The results of 29m at 0.12 per cent cobalt from 66m and 18m running 0.16 per cent cobalt, accompanied by 0.16 per cent copper from 110m, came from the first diamond drill hole plunged into the site.

Management says it hammered a further four diamond holes into its ground, with all five holes intersecting sulphides up to 300m from the existing defined cobalt footprint. It says the strong copper anomalism encountered from the drilling adds to the prospectivity of the tenure and it is keenly awaiting the remaining assays that are due in about a month.

Market punters were initially slow to embrace the news and closed the price down on Friday at 3.1c on decent volume of 14.4 million, before slowly warming to it this week. They then moved the price to a close of 4c on Monday on volume of 13 million shares, before deciding to launch all-in and grab a slice of the action on Tuesday, piling in to the tune of 30.8 million units and propelling the shares to a 6.5c high and a weekly return of almost 110 per cent.

Sometimes it pays to rethink things across the weekend.

Rhythm Biosciences rounded out this week’s top gainers with an 84 per cent jump after disclosing that the company’s evaluation of its second-generation ColoSTAT Multiplex Alpha Kits exhibited superior results when compared to its original kits.

Management says its preliminary testing results, conducted across 200 previously collected patient serum samples to generate new assay data, has assisted in the creation of a new prototype algorithm designed to effectively classify the samples as cancerous or non-cancerous.

It adds that the new kits have a more than 70 per cent probability of possessing superior characteristics compared to the originals.

Rhythm’s shares, which rarely exceed a volume of greater than 1 million traded in a single day, did so for the first time in eight months, with nearly eight million units swapping hands on Monday. The volume helped push the price from 7.6c to a high of 14c.

The company is now planning to validate its in-house results by using independent clinical samples and partners in the near future and noted it expects the performance of its kits to show further improvement as the assay method is optimised and further data aids in the algorithm’s development.

As we’ve said many times, we here at Runners always love a late runner and in keeping with the lithium theme, Iris Metals staged an 11th-hour burst on Friday by revealing it has successfully converted the lithium mineral spodumene, entirely sourced from its Beecher project that sits in South Dakota, into 99.5 per cent battery-grade lithium carbonate.

The conversion process was completed in the US, adding further capability to the country’s intention to secure a local supply of the much-needed material required for EV batteries.

Market punters jumped onboard, pumping up the price today from 18c to reach a high of 37c, for a “happy to take that every day of the week” return of 105.56 per cent on the last trading day of the week and on well above average volume of more than 3 million shares changing ownership.

The week has seen an interesting mix of winners and runners. However, to us here at Bulls N’ Bears, the real interest has been witnessing the initial signs of the re-emergence of lithium and the market potentially welcoming the critical mineral back into the fold.

Is your ASX-listed company doing something interesting? Contact: matt.birney@wanews.com.au