Rio Tinto Limited (RIO) is raising $9 billion in U.S. investment-grade bonds as it seeks to fund its recently closed acquisition of Arcadium Lithium (ALTM). The $6.7 billion deal, completed last week, will see Arcadium rebranded as Rio Tinto Lithium. Following the announcement, RIO stock gained 0.081% in pre-market trading, while Rio’s Australia-listed shares (AU:RIO) fell nearly 2%.
More Details on the Bonds Issue
Rio is issuing fixed and floating rate debt across eight tranches, with maturities ranging from two to 40 years. The interest rate ranges from 4.375% to 4.875%. The funds raised will support general corporate purposes, including repaying the bridge loan used for the Arcadium acquisition.
As part of the offering, the company priced $750 million in 40-year notes with a fixed coupon of 5.875%, set to mature in 2065. This is the longest tranche, which is expected to yield approximately 1.625 percentage points over U.S. Treasuries.
Meanwhile, the bond offering took place amid signs of market stabilization on Tuesday morning. A broad sell-off on Monday, driven by recession fears, had kept many potential borrowers on the sidelines.
Rio Tinto Strengthens Position as a Global Lithium Leader
Rio Tinto’s acquisition of Arcadium strengthens its position as a leading global lithium supplier, aligning with the growing demand for the metal essential to the clean energy transition. Moreover, this acquisition is set to enhance Rio’s lithium production capacity, targeting over 200,000 tonnes of lithium carbonate equivalent (LCE) annually by 2028.
Despite near-term challenges, lithium’s long-term prospects remain strong, with demand expected to surge later this decade. Growth is expected to be driven by the expanding electric vehicle (EV) market and the rising need for lithium-ion batteries in renewable energy storage.
Is Rio Stock a Good Buy Now?
According to TipRanks, RIO stock has received a Strong Buy rating based on five recommendations, of which four are Buys. The RIO share price forecast is 82.14, which is 33% above the current trading level.
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