UPDATED 10:48AM MARCH 28, 2023, FIRST PUBLISHED AT 10:07AM MARCH 28, 2023
Lithium producer Liontown Resources has rejected a $US3.7bn ($5.5bn) takeover bid by mining giant Albemarle, marking the third buyout offer fobbed off by the Perth company, as global interest in the battery making material surges.
The $2.50 a share proposal landed on Monday but was brushed off by Liontown’s board and followed two earlier bids also being turned down of $2.35 a share on March 3 and $2.30 a share on October 20.
Liontown added it had become “recently aware” that an Albermarle subsidiary, RT Lithium, had also built a 2.2 per cent stake in the company.
Shares in Liontown surged as much as 53 per cent to reach its highest price on record and were trading at $2.34 shortly after the market open on Tuesday.
The third bid continues to “substantially undervalue” Liontown and was not in the best interest of shareholders, the company said in an ASX statement.
Liontown pointed to the “opportunistic timing” of the takeover offer, which had coincided with recent softness in companies exposed to the lithium sector and the pre-production status of its Kathleen Valley project.
The deal also failed to take into account the “de-risking” that had taken place at Kathleen Valley in recent months, with a mid-2024 first production target in place and a 20 per cent increase in plant output to 3 million tonnes a year.
Kathleen Valley also had a “scarcity value”, according to Liontown, with few other assets of its size close to production in Australia.
“Liontown continues to progress a number of attractive funding options for the remaining capital at the Kathleen Valley project and expects to update the market on this front in the near term,” a statement said.
The company noted in January that it expected capital costs to build at Kathleen Valley of about $895m, including a $40m contingency reserve, which was about 65 per cent more than the $545m estimate when the company began a final investment decision in June 2022.
Included in the new capital estimate is the cost of building a bigger processing plant than initially planned, the installation of more wind turbines to help power the operation, and additional water and other supporting infrastructure to run an expanded processing facility.
Liontown managing director Tony Ottaviano said building Kathleen Valley would blow out to about $750m.
On top of that, Liontown was having to spend more money to make sure the mine enters the market in 2024 – including a 60 per cent increase to the size of the camp to support a larger construction workforce, with scope changes accounting for the remainder of the capital estimate blowout.
Albermarle in September told The Australian it expected record-high lithium prices will remain elevated this decade amid soaring electric vehicle orders and supply constraints, as it looks to more than double production at its West Australian refinery to meet demand.
Lithium carbonate, a material used in batteries for EVs, has seen volatile markets so far this year with prices down by a third in the last month alone amid a slump in demand for EVs.
Albemarle owns a 60 per cent stake in Wodgina – located in the Pilbara and Australia’s second-biggest lithium mine – which it initially mothballed as lithium prices tumbled in 2019. It’s since resumed production and is now operating at two-thirds capacity.
Albemarle also owns a share in the Greenbushes lithium mine in the state’s southwest.
Top executives from the $US33bn US-listed producer toured Perth last year to tour the company’s WA operations, including meetings with joint venture partner Chris Ellison’s Mineral Resources – which is considering its own lithium spin-off that could be worth up to $17bn.
LTR Price at posting:
$2.30 Sentiment: None Disclosure: Held
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