Is it time to follow Rio Tinto's lead and buy ASX lithium shares?

Is this the time to charge into ASX lithium shares?

| More on:
Man in yellow hard hat looks through binoculars as man in white hard hat stands behind him and points.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Rio Tinto Ltd (ASX: RIO) recently launched an ambitious takeover bid for Arcadium Lithium CDI (ASX: LTM), which raises some interesting questions about ASX lithium shares.

If a major player like Rio Tinto sees an opportunity with lithium stocks and is willing to pay a large premium for an ASX mining share, then it's probably worth considering whether the beaten-up sector is actually an opportunity for the long term.

As a reminder, Rio Tinto's offer of US$5.85 per share has been accepted. This represented a premium of 90% to Arcadium's closing price of $3.08 per share on 4 October 2024 and 39% to Arcadium's volume-weighted average price since it was created on 4 January 2024.

Rio Tinto said this takeover was a "counter-cyclical" expansion, increasing its exposure to a "high-growth, attractive market at the right point in the cycle".

Consequently, broker E&P Financial has suggested that ASX lithium shares are just one deal away from a resurgence, with a shrinking number of miners to invest in, according to reporting by the Australian Financial Review. The broker mentioned Pilbara Minerals Ltd (ASX: PLS) and Liontown Resources Ltd (ASX: LTR) as opportunities.

Expert views on ASX lithium share

E&P Financial said that Rio Tinto's Arcadium Lithium deal could spark institutional investment in ASX lithium shares if investors speculate on the next takeover target.

The AFR quoted E&P financial analyst Adam Martin, who said in a note to clients:

Rio's acquisition of Arcadium feels like bottom of the cycle M&A. We are conscious that one more M&A deal in the lithium sector would 'light up' equities given limited options to play this thematic globally.

However, Martin also warned that some ASX lithium shares were struggling to make a profit at the current spodumene/lithium price after factoring in capital expenditure growth. He said:

There is market to market downside risk to consensus earnings in the shorter term given spot lithium prices.

E&P has lowered its lithium forecasts over the next six months, according to the AFR. S&P Global Platts says the current spodumene price is approximately US$760 per tonne, and E&P Financial is forecasting the spodumene price could rise to US$850 per tonne in the second quarter of FY25 and reach US$1,000 per tonne in the third quarter.

The broker suggested Pilbara Minerals and Liontown Resources as potential acquisition targets. E&P Financial said that Fortescue Ltd (ASX: FMG), due to its recent drilling activity, or another industrial company, could want to enter lithium mining.

In the broker's eyes, Pilbara Minerals shares could be the best choice as a "less risky option". This is due to its "strong" balance sheet with a large cash pile, a competitive cost structure and potential for growth following a recovery of lithium prices, according to the AFR.

So, now may well be a good time to look at ASX lithium shares, if the lithium price and share prices keep rising from here.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the 'five best ASX stocks' for investors to buy right now. We believe these stocks are trading at attractive prices and Scott thinks they could be great buys right now...

See The 5 Stocks *Returns as of 30 April 2025

Motley Fool contributor Tristan Harrison has positions in Fortescue. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Energy Shares

A young male ASX investor raises his clenched fists in excitement because of rising ASX share prices today
Energy Shares

Why are ASX uranium stocks rocketing today?

These shares are shining brightly on Friday. Let's find out why.

Read more »

Worker on a laptop at an oil and gas pipeline.
Energy Shares

Why the Woodside share price is looking cheap today

A leading fund manager believes Woodside shares have an “asymmetric skew to the upside”.

Read more »

Coal miner holding a giant coal rock in his hand making a circle with his hand, symbolising a rising share price.
Energy Shares

2 ASX 200 coal stocks to buy now despite tariff impact: Expert

Investors are nervous about the impact of US tariffs on global coal consumption.

Read more »

Man raising both his arms in the air with a piggy bank on his lap, symbolising a record high.
Share Market News

US-China tariff deal sparks strong week for ASX 200

Energy shares ripped 5.77% higher while the ASX 200 lifted 1.37% over the five days.

Read more »

Coal miner standing in a coal mine.
Dividend Investing

Down 22% this year, does this ASX dividend share still offer investors a 10% yield?

There's a difference in trailing and forward dividend yields.

Read more »

Worker inspecting oil and gas pipeline.
Energy Shares

What's moving the Woodside share price on Friday?

Here's the latest news from the ASX 200 oil and gas giant.

Read more »

Miner looking at a tablet.
Share Gainers

Up 93% since April should I still buy Boss Energy shares now?

Boss Energy shares, the most shorted on the ASX, have almost doubled in value in one month. Now what?

Read more »

A man in his 30s holds his laptop and operates it with his other hand as he has a look of pleasant surprise on his face as though he is learning something new or finding hidden value in something on the screen.
Share Gainers

Boss Energy shares have rocketed 90% in a month. Here's why

The massive rally in Boss Energy shares will be painful to the host of short sellers betting against the uranium…

Read more »