Rio Tinto Group's (ASX:RIO) planned acquisition of Arcadium Lithium (ASX:LTM) bodes well for the lithium sector, said Euroz Hartleys in an Oct. 10 note.

The mining giant announced that it is acquiring Arcadium for AU$8.70 cash per share, a 45% premium to the last trade price, and valuing the latter at about AU$10 billion.

Before Rio's bid, the consensus price target on Arcadium was AU$5.17, implying that Rio assumed high lithium prices, the broker said.

Arcadium is "very well positioned" to supply lithium outside China, particularly with the US' push to grow its electronic vehicles industry.

Given its balance sheet, Rio is likely to build a large chemicals business with integrated raw materials to supply to North America. Over the next five to eight years, it will also likely consolidate the industry to maintain a high market share, Euroz Hartleys wrote.

"A big balance sheet miner that can build the raw material supply into North America is very bullish for that market, which has lacked meaningful independent raw material supply visibility," it added.

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