Did this Senator profit from mining stock buy before major acquisition?

In a disclosure dated March 29, Tom Carper, the senior United States Senator from Delaware, revealed a March 21 purchase of $1,001 to $15,000 in Arcadium Lithium (NYSE: ALTM) shares.

The mid-cap mining stock had not been traded by any U.S. politician before — and it hasn’t been traded since.

ALTM is down 18.50% year-to-date (YTD) — however, the recent October 9 announcement that Rio Tinto (NYSE: RIO) will acquire the company in a $6.7 billion all-cash deal has seen stock prices rise by 30% the same day.

Carper acquired shares at a price of $4.63 — at press time, ALTM stock is trading at $5.55, bringing returns between March 21 and Oct 9 to 19.87%. Depending on the amount invested, the Senator could be up between $198 and $2,980 on that single trade, according to the latest data from the US Senator Stock Trading Radar by Finbold.

Carper’s subcommittee assignments

Although Carper’s trade pales in comparison to the profits secured by some of his colleagues, like Senator Markwayne Mullin’s timely trade which saw him secure 76.24% gains on Raytheon (NYSE: RTX), 19.87% is by no means a weak return on a single trade.

That’s even without touching on the ethical mire that is political stock trading — as it happens (like it almost always does), Senator Carper is in a position to have information not available to the public. 

Carper is the chair of the Committee on Environment and Public Works — as such, he sits on the Subcommittee on Energy, Natural Resources, and Infrastructure, while also being the chair of the Subcommittee on International Trade, Customs, and Global Competitiveness.

The role of lithium in the ongoing green energy transition is well documented — and the Senator’s committee assignments give him a unique position that appears to span just about every intersection between lithium mining and public policy.

Rio Tinto’s strategic move

Rio Tinto, the world’s largest producer of iron ore, and a leading producer of aluminium, is set to become the third-largest lithium mining company with this acquisition. RIO’s deal included a $0.90 premium on ALTM stock at the time of the announcement — shares will be acquired for $5.85 apiece, slightly above current prices of $5.55.

This will be the company’s biggest acquisition since 2007 — and although RIO has shed 10.65% YTD amidst lithium oversupply, the mining giant remains optimistic regarding long-term prospects. 

This opinion is shared by Jefferies equity analyst Chris LaFemina, who maintained a ‘Buy’ rating while raising his price target from $81 to $83 on October 9.

Investors should note, however, that Rio Tinto’s shameful human rights and sustainability record presents an ongoing PR risk. 

Incidents such as the destruction of Aboriginal peoples’ sacred sites in the Juukan Gorge, and the company’s involvement in the Bougainville Civil War are the rule, rather than the exception. 

Ongoing protests regarding the company’s proposed lithium mining project in Jadar, Serbia, and potential lawsuits due to waterway pollution from uranium and lead in Madagascar are just some of the company’s most recent PR challenges — and in an era of expanding ESG criteria, they could have deleterious effects on both public perception and investor sentiment.