Lithium Grab: 2 Lithium Stocks That Could Be Takeover Targets

Key Points

• Rio Tinto acquired Arcadium Lithium for a 90% premium as it entered the lithium market as one of its largest producers, sending lithium stocks rising in anticipation of future deals.
• Sigma Lithium is one of the largest Zero Green Lithium producers of high-quality battery-grade lithium produced with zero carbon, zero chemicals and zero tailings.
• Lithium Americas is working on financing the development of the Thacker Pass Project in Nevada, estimated to hold the largest natural lithium resource in North America.

Lithium stocks are getting interest again, driven by acquisitions and the entry of a major miner into the industry. On October 9, 2024, the world's second-largest mining company in the basic materials sector, Rio Tinto Group NYSE: RIO, announced it would be acquiring Arcadium Lithium plc NYSE: ALTM for $5.85 per cash or $6.7 billion in an all-cash deal. Rio Tinto's subsidiary Rio Tinto BM Subsidiary Limited will be making the acquisition to become the largest lithium resource base in the world.

The buyout strengthens Rio Tinto's position in energy transition commodities and propels it into a leading role in lithium production, with lithium carbonate equivalent output set to reach 75,000 tons annually by 2028. While the deal is expected to close in the second half of 2025, investors jumped into lithium stocks in anticipation of potentially more deals to come. The battery-grade lithium will be used to power electric vehicles (EVs), mobile devices and consumer electronics worldwide. Here are two lithium stocks that could also be acquisition targets.

Sigma Lithium: The Eco-Friendly Sustainable Triple Zero Green Lithium Producer

Based in San Paolo, Brazil, Sigma Lithium Co. NASDAQ: SGML is specifically focused on using environmentally sustainable methods to mine and produce high-purity lithium concentrate in Brazil. It’s touted its Triple Zero Green Lithium, which is processed, producing zero carbon with zero (hazardous) chemicals and zero tailings as they get recycled. The company uses non-drinkable water designated for industrial use after being recycled in a production plant.

It has constructed a state-of-the-art Greentech lithium processing facility onsite at its flagship property. The plant was designed to produce high-quality, battery-grade lithium concentrate using sustainably efficient methods. Currently, the plant is producing nearly at full capacity.

Flagship Project: Grota do Cirilo

Sigma owns 100% interest in its flagship project, Grota do Cirilo, in the Minas Gerais state of Brazil. It also owns 100% interest in the Genipapo and Sao Jose projects. Its interests total 185 square kilometers with 29 mineral rights. Sigma has the largest lithium hard rock deposit in the Americas.

It’s Phase 1 is currently in operation with Phase 2 and Phase 3 being prepared for expansion. Phase 2 has secured financing for $86.5 million and is expected to more than double production capacity to 520,000 tons annually in 2025.

Sigma Lithium Is in Production

The company delivered its 11^th shipment on August 13, 2024, for 22,000 metric tons of its Triple Zero lithium, bringing its year-to-date (YTD) total to 71,650 metric tons. It's also produced 100,000 metric tons of its ultra-fine lithium YTD. The company averages 22,500 metric tons of lithium monthly, equating to an annual production of up to 270,000 metric tons annually, depending on conditions. The company wants to bolster capacity up to 770,000 metric tons at the end of Phase 3. The proven and probable reserves are 54.9 million tons of 1.44% lithium oxide (Li2O). Its measured and indicated resources suggest 85.7 million tons of ore with 1.43% grading Li2O, including reserves.

Prior Takeover Speculation

Because of its eco-friendly green lithium and large resources, Sigma has been the subject of takeover speculation in the past. Bloomberg reported in February 2023 that Tesla Inc. NASDAQ: TSLA was interested in acquiring them for $3 billion. The current market cap is $631 million. There was also speculation that China was interested through its Ganfeng Lithium and Tianqi Lithium companies. Sigma flat out stated it was not for sale, and the company is focused on growing its business and capacity. But that's not to say a large buyer couldn’t make it an offer it can’t refuse in the future after the Arcadium Lithium buyout.

Lithium Americas: Big Potential in North America   

Based in Vancouver, British Columbia, Canadian mining company Lithium Americas Co. NYSE: LAC plans to be a major domestic producer of battery-grade lithium. Its two flagship properties include the Thacker Pass project in Humboldt County, Nevada, and Cauchari-Olaroz in the Jujoy Province, Argentina.

Lithium Americas split into two companies with Lithium Argentina handling the Cauchari-Olaroz project.

The Thacker Pass Project

Lithium Americas is still working on financing the production of the largest known Measured and Indicated lithium resource in North America. General Motors Inc. NYSE: GM is an investor that already purchased $320 million in LAC stock and intends to complete the additional $330 million investment supporting its development. The United States Department of Energy (DOE) provided a conditional commitment for a loan of $2.26 billion under the Advanced Technology Vehicles Manufacturing Loan Program. Thacker Pass could produce enough lithium carbonate to power 800,000 EVs annually. Lithium Americas hopes to close the loan by year's end and begin production in the second half of 2026.

Cauchari-Olaroz Project

This is a joint venture with Lithium Argentina, with 44.8% interest, China’s Ganfeng Lithium, with 46.7% interest, and Jujuy Energia y Mineria Sociedad del Estado, with 8.5%, nearing the completion of its construction. Stage 1 capacity is 40,000 tonnes per annum (tpa). A metric ton weighs 2,204.6 pounds or 1,000 kilograms and is indicated by the spelling "tonne" versus a ton weighing 2,000 pounds spelled "ton." Stage 2 is expected to increase production by an extra 20,000 tpa.