Rio Tinto’s $10 billion cash acquisition of Arcadium to build its credentials as a serious player in lithium has given ASX-listed junior lithium stocks a much needed shot in the arm.

Even a company the size of Rio does not lash out that sort of cash unless it thinks that lithium’s role in the energy transition (up to 85kg of the stuff goes into each electric vehicle and 80% is currently consumed by EVs and energy storage) – is guaranteed.

But it stopped well short of saying that the current depressed pricing for lithium – down 80% on a spot basis from peak levels – is the bottom and that it would be a case of prices being on the up and up.

What Rio does have faith in is the long-term outlook for lithium, with an expected market deficit emerging from the end of this decade, and a double-digit growth rate to 2040.

Its urbane master Jakob Stausholm said that getting big in lithium – it has been frustrated with development plans in Serbia and has found its Rincon project in Argentina more challenging than expected – made sense because lithium was “one of the fastest growing markets today and is expected to reach an even greater scale in the coming decades”.

The assessment of Rio and its consultants is that lithium will enjoy a more than 10% compound annual growth rate in demand through to 2040, eventually leading to a supply deficit.

The forecast deficit starts to emerge in 2030 and becomes pronounced by 2035 when lithium demand approaches 6Mtpa of lithium carbonate equivalent annually versus the 1.3Mtpa currently.

Deficits are good for price support. But there was no guidance from Rio on where prices are actually headed.

Still, those smart with numbers reckon that if the acquisition cost – it was a 90% premium to Arcadium’s price before the bid and a 39% premium to its average price since its formation in January through the merger of the ASX-listed Allkem and the US industry stalwart Livent – says a lot.

Working backwards, the smarties reckon that for the Arcadium acquisition to work for Rio, it had to be assuming that prices for spodumene concentrates would need to be in a $US1600-$US1800/t range. Spodumene is currently about $US900/t.

That is a hip hip hooray realisation for investors when they survey the beaten up values of the junior lithium explorers and developers. That came through loud and clear in Thursday’s market, with most of the juniors enjoying solid share price gains.

Apart from what Rio’s takeover says about the future direction of prices, there was also an added “takeover” factor at play for those juniors with quality projects that will be needed, in time, to fill the supply deficit Rio says is coming.

Wildcat Resources (ASX:WC8) was the prime example with its 6c or 18.5c gain to 39c. The company is due to release a maiden resource estimate for its highly rated Tabba Tabba lithium project in the Pilbara by the end of the year, with a first pass 60-80Mt at 1% expected.

In a pre-Rio takeover bid research note that followed an analyst site tour at Tabba Tabba, Euroz Hartleys stated somewhat presciently that it was the kind of time in the lithium commodity pricing environment to be buying high quality assets at a discount.

The October 4 note came with a 75c price target so it could be suggested that Wildcat was on the move before the Rio news hit. As it is, more than a few around town had it marked as a takeover target for Rio.

And it probably still is as the Rio-Arcadium combine does not have a Pilbara presence and probably should given the quality and scale of the operations there (Pilbara Minerals and the Wodgina operation of Mineral Resources/Albemarle), with the development of Tabba Tabba and the Hancock-SQM owned Andover project to come.

Pilbara Minerals (ASX:PLS), another that Rio could well bid for, was up 2.46% in Thursday’s market. It also provided the lithium sector with a shot in the arm recently with its acquisition of Brazilian developer Latin Resources (ASX:LRS) for $560m in shares, not cash.

Mineral Resources (ASX:MIN) was up 6.7% in Thursday’s market. It has a big say in Wildcat’s future as it is a 19.9% shareholder.

The joy in the sector from Rio’s move spread to ASX-listed stocks active in overseas markets with Cygnus (ASX:CY5) up by 10.8% (it has projects in James Bay in Quebec where Arcadium has a big presence).

Patriot Battery metals (ASX:PMT) – another likely Rio target and active in Quebec – gained 6.9%.

Nimy:

From the update file comes news that Nimy (ASX:NIM) is creating a bit of buzz in exploration circles with its discovery of a high-grade copper trend at its Masson prospect, part of the broader province scale Mons project area to the north-west of Southern Cross.

The buzz has yet to make its way across to the stock market. Nimy was last mentioned here on September 13 when it was trading at 9c for a market cap of $16 million. It closed on Thursday at 6.2c for a $10.7 million market cap.

The September 13 mention was prompted by Nimy reporting that all four holes in a drilling program at Masson had returned massive, disseminated and vein-style sulphide mineralisation on visual inspection.

The assays results are now in and didn’t disappoint given the early stage nature of the prospect which like the broader Mons, is in a very sparsely explored part of WA. Assays for the fourth hole are pending.

Assays from  the first three holes returned broad copper, nickel and cobalt and PGE mineralisation. Because all three returned copper assays of more than 1%, the presence of a relatively shallow copper lens is the interpretation.

Nimy reckons the results “confirmed Masson as a significant discovery”.

‘’Hosted within mafic intrusive rocks, the emergence of copper at these levels, particularly as Nimy drills deeper, signifies a dynamic system, part of a much larger mafic intrusion,” the company said.

There is plenty of room for a larger intrusion/copper lens repeats as coincident geophysical anomalies extend 3.1km to the north of Masson and 3.8km to the southwest. Planning for more drilling is underway.

Meanwhile, in a bit of a distraction to the frontier copper-nickel hunt at Mons, Nimy has hit high grade gallium (a base metals pathfinder element) and anomalous rare earth mineralisation when drilling in the Block 3 East area at Mons.

China (98% of the market) made gallium more critical than it already was when it introduced export quotas in August 23, so there is no harm in assessing whether Nimy could have a discrete, standalone gallium opportunity on its hands.