LONDON/MELBOURNE, Oct 9 (Reuters) – Rio Tinto (RIO.AX), opens new tab, (RIO.L), opens new tab has agreed to buy U.S. based Arcadium Lithium (ALTM.N), opens new tab for $6.7 billion, it said on Wednesday, a deal that will catapult it to become the world’s third largest miner of the metal used in electric vehicle batteries.

Already the world’s largest producer of iron ore, Rio is transforming itself into a processor of high end, low carbon raw materials essential for the energy transition. The market is currently oversupplied with lithium, but CEO Jakob Stausholm said Rio is confident that long-term demand will be strong.

Rio said it would pay $5.85 per share in cash for Arcadium, an almost 90% premium to its closing price of $3.08 per share on Oct. 4, the day Reuters exclusively reported a potential deal.

Rio’s London-listed shares were down 0.4% by 1054 GMT. Shares in U.S.-listed Arcadium jumped around 40% on Monday, after the companies confirmed negotiations.

Rio would gain access to lithium mines, processing facilities and deposits in Argentina, Australia, Canada and the United States to fuel decades of growth, as well as customers that include Tesla (TSLA.O), opens new tab, BMW (BMWG.DE), opens new tab and General Motors (GM.N)

Lithium prices have floundered due to Chinese oversupply and a slowdown in electric vehicle sales, resulting in miners of the metal emerging as attractive takeover targets.

Rio’s Stausholm told investors that by the end of the decade the company expects a shortfall in supply, with a more than 10% compound annual growth rate in demand through to 2040, boosted by electric vehicles and energy storage.

The current weak market was an opportunity to pick up top quality assets at the right price, Stausholm told Reuters.

“We really want battery-grade lithium, i.e. the processing as well. And then, of course, we like to be an operator, and if you take those criteria, you very quickly come to Arcadium,” he said.

“The way you should think about it is kind of a reverse takeover. This is not a case about cutting costs. This is a case about building faster and better,” he added.

The deal won’t make a material difference to Rio’s current capex plans of up to $10 billion in 2025 and 2026, Stausholm said.

For the whole article go to Reuters.