Once upon a time, FMC Corporation (NYSE: FMC) stock was a lithium stock. It isn't anymore, hasn't been for years, and its poor showing earlier this month, when weaker than expected sales resulted in a big (74%) decline in reported profit, may highlight the risk of abandoning diversification and focusing too exclusively on just one sector (agricultural chemicals).

But what ever happened to FMC's lithium business, anyway? And where is it now? That's the story I want to tell today, for anyone who may have missed it at the time, and for anyone who might be interested in buying one of the best lithium growth stories of the next few years.

Taking the scenic route from FMC to Rio Tinto

As recently as 2018, FMC was one of the world's biggest lithium stocks. It had built its lithium business over the course of more than four decades, and alongside Sociedad Química y Minera de Chile and Albemarle, ranked among the three biggest publicly traded producers of lithium for electric car batteries.

Electric vehicles were on the rise back then, though, and FMC wanted to capitalize on that trend by spinning off its lithium operations as a pure play on this popular product. In 2018, FMC announced (and in 2019 it completed) a spinoff of its lithium business as the newly public "Livent Corporation." What remained was the $4.6 billion business (closer to $4.2 billion in sales today), focusing on the production and sale of insecticides, herbicides, fungicides, and crop nutrition chemicals, that we know as FMC Corporation today.

And spun-off Livent? Well, Livent remained an independent company for about five years, until early 2024, when the company entered into a merger of equals with Australian lithium miner Allkem (itself formerly known as Orocobre). These two companies rebranded themselves as Arcadium Lithium (NYSE: ALTM) after their merger, and boasted of their "premier lithium resources and manufacturing sites in key locations globally across the lithium value chain."

Arcadium Lithium remains an independent lithium producer to this day, and with $155 million in GAAP net earnings over the last 12 months, it's arguably one of the most successful lithium stocks. But Arcadium Lithium won't be independent much longer. Last year, London-based mining giant Rio Tinto Group (RIO -1.18%) announced it would pay $6.7 billion to acquire all of Arcadium Lithium, and use the company to bulk up lithium revenue from its own small "minerals" business.

Rio's still in the process of finalizing this last merger, but once it happens, Rio plans to create a new business segment called Rio Tinto Lithium. With less than $7 billion in estimated annual revenue, I'd expect Rio Tinto Lithium to end up being the third or fourth biggest business unit within Rio (which focuses on mining iron and aluminum).

Still, that would make Rio Tinto Lithium at least the second biggest publicly traded lithium producer in the world, ahead of Chile's SQM, and perhaps equal to or ahead of Albemarle in terms of revenue derived from lithium sales.

Is Rio Tinto stock a buy?

Earlier this month, I argued that declining profitability and sales made the company a poor investment choice. But what about the one that got away? Could Rio Tinto Lithium, which includes the bulk of what used to be FMC's lithium business, be a stock worth buying?

I think it might be. On the one hand, with only $7.1 billion in real free cash flow (FCF) to $10.7 billion in reported net income over the last 12 months, Rio doesn't currently have great "quality of earnings." (That's about $0.66 in FCF for every $1 in reported earnings.) Over long periods of time, however, these numbers tend to even out. Over the last five years for example, real free cash flow backed up reported net income by nearly 90%, with Rio reporting $54.4 billion in FCF against $61.3 billion in net income.

Rio Tinto sports a $105 billion market cap currently, which puts its P/E ratio at just over 9x. Assuming the price-to-free-cash-flow ratio eventually catches up to that, I think Rio Tinto stock actually looks quite attractive. Although analysts aren't expecting much earnings growth over the next five years, Rio Tinto seems to think that lithium prices are due for a rebound. If it's right, then earnings could surprise investors, and rise modestly in future years.

Meanwhile, Rio Tinto pays a generous 7.1% annual dividend yield, and investors can enjoy that while waiting to see if Rio Tinto was right to buy Arcadium Lithium.