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New division to be called Rio Tinto Lithium

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Arcadium CEO Graves to lead new lithium unit

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Rio Tinto Lithium to incorporate Rincon project

By Clara Denina and Ernest Scheyder

LONDON/HOUSTON, Jan 17 (Reuters) - Anglo-Australian

mining giant Rio Tinto plans to create a

standalone lithium division after it closes its $6.7 billion

acquisition of Arcadium Lithium ( ARLTF ), according to an

internal memo seen by Reuters.

The plan reflects how closely tied Rio CEO Jakob Stausholm

and his leadership team believe lithium is to the company's

future and the high value they place on Arcadium's engineers as

part of the deal.

Arcadium's shareholders approved the sale last month and

closing is expected by July.

The new business, Rio Tinto Lithium, will assume control of

Rio's $2.5 billion Rincon project in Argentina but not its

controversial Jadar lithium project in Serbia.

This is to "ensure we give laser focus to successful

integration once the transaction completes," Rio's Stausholm

told employees in the memo.

The deal is Rio's largest in more than a decade.

Given that unfamiliarity with integrating an entire company,

Rio executives plan to absorb Arcadium slowly out of concern

that forcefully integrating the lithium producer could prompt an

exit of talent that could abrogate the deal's value, according

to two sources with knowledge of the matter.

Paul Graves, the Arcadium CEO and former Goldman Sachs

banker, is expected to lead the lithium operations from

New York.

DEAL LOGIC

The deal will make Rio the world's third-largest producer of

lithium, a metal used to build batteries for electric vehicles

and many electronics, just as demand is expected to increase

later this decade after a recent supply glut.

Already the world's largest producer of iron ore and a major

copper producer, Rio is transforming itself into a processor of

high-end, low-carbon minerals needed to power the energy

transition.

Rio's existing Minerals division has struggled in the past

few years to gain approval for its planned lithium project in

Serbia due to opposition from locals and environmental groups.

Meanwhile, it has expanded production plans for the battery

metal at its Rincon project and is on the shortlist to partner

with Chilean state miner Codelco on a new lithium project.

At Rincon, Rio produced its first metric ton of lithium in

December using direct lithium extraction (DLE), an innovative

process meant to quicken production that numerous rivals are

attempting to implement at commercial scale. Still, that

milestone took three years.

The Minerals division also produces diamonds, boron and

titanium dioxide, a white pigment used in foods and consumer

goods.

Arcadium has around 2,400 employees across nine countries.

Roughly 84% of its revenue comes from Asia - the global centre

for lithium demand - giving it growth potential as EV projects

ramp up across the Western hemisphere, especially those

supported by the U.S. Inflation Reduction Act.

(Reporting by Ernest Scheyder and Clara Denina; Editing by

Emelia Sithole-Matarise)