(Bloomberg) -- Shares of some lithium companies surged after Rio Tinto Group made an approach for Arcadium Lithium Plc.

Lithium stocks have struggled amid excess supplies and weak demand for the key battery metal used in electric vehicles. The spot price for lithium carbonate in China is down more than 85% from its peak in 2022.  

Rio’s approach for Arcadium — a US-based producer with operations across four continents — is spurring optimism that smaller lithium producers may be takeover targets.

Lithium miners including Liontown Resources Ltd., Sayona Mining Ltd and Lithium Americas Corp. rose more than 10% on Monday. Shares of Global X Lithium & Battery Tech ETF gained more than 5% in New York. 

“Because prices are depressed, and therefore corporate valuations are depressed, that stimulates interest from prospective buyers,” said Pavel Molchanov, an analyst at Raymond James & Associates Inc. 

“The fact we have a blue-chip mining conglomerate interested in making a multi-billion dollar acquisition — that’s bullish for the whole industry.” 

The deal, if it goes through, would make Rio Tinto one of the largest producers of lithium. The company has sought to find greater exposure to the metal after its Jadar mine in Serbia — which was supposed to become one of the world’s largest lithium mines — was paused indefinitely following pushback from the Serbian government. 

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