Expert Commentary by Bahay Ozcakmak, Parkway Corporate
Arcadium Lithium, through a predecessor company, was the first to develop an early version of Direct Lithium Extraction (DLE) technology at an Argentine lithium brine site in the 1990s, which is still operational today.
Although brine ponds are also used there in conjunction with DLE, Arcadium’s decades of experience with this technology makes the company an enticing target for Rio Tinto, which aims to develop lithium deposits in Chile, where authorities are phasing out brine ponds and requiring DLE, and elsewhere.
“It (DLE) is actually the solution to provide the lithium that the world needs,” Rio CEO Jakob Stausholm told investors on Wednesday after announcing the all-cash acquisition. Arcadium is valued at a 90% premium to its share price before Reuters first reported talks between the companies last Friday.
Arcadium’s Argentine DLE operations are located near a DLE project for which Rio paid $825 million in 2022, although that project has not yet produced any lithium. Arcadium’s engineers have already met with Rio’s DLE team, Stausholm said.
MY OPINION:
- – Innovative process technologies have the potential to completely disrupt conventional supply/value chains, including in mining and specialty chemicals.
– Innovative process technologies can change the cost structures of operators, thereby further entrenching established companies or giving emerging market participants the opportunity to quickly change direction.
– In the past, large mining companies have attempted to shape these technologies through “collaboration environments”. As someone who has long been active in this field, I know this means the larger company wants the junior TechCompany to share all their ideas, the larger company owns all the intellectual property, and the junior is eventually pushed aside. This strategy of “appropriating intellectual property” is common wherever there is a power imbalance between the large established companies in an industry and the emerging companies. Startups – be warned ⚡!
– Large operators like Rio are able to invest in forward-looking technologies to catch the next wave of innovation.
– While Parkway Process Solutions does not specifically focus on the DLE sector (we consider it a commercially challenging sector, as we believe any margin will disappear over time due to the large number of well-capitalized challengers), as outlined in our recent quarterly report, we were engaged by a large global company to assist them in exploring opportunities to remove bottlenecks in lithium projects using one of our technology portfolios.
In summary, innovative process technology portfolios supported by teams with deep expertise have the potential to bring about comprehensive change and are therefore strategically extremely valuable in the right hands.
