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Hanrine Future Metals

Less than five hours after Liontown Resources announced the withdrawal of Albemarle’s $6.6 billion takeover bid, the lithium junior’s biggest shareholder, Gina Rinehart, was busy setting up a new vehicle for her pivot toward critical minerals.

It was 2.13pm on Monday when the Australian Securities and Investments Commission (ASIC) received the paperwork for the establishment of a new company called Hanrine Future Metals.

Liontown Resources boss Tony Ottaviano has had a tough week. Trevor Collens

The new company was wholly owned by Mrs Rinehart’s flagship company Hancock Prospecting, it shared Hancock’s address on Ventnor Street in West Perth and was staffed by some of Mrs Rinehart’s most loyal lieutenants like Tad Watroba.

At the same time about 250 metres away in the Liontown offices on Ord Street, the post-Albemarle era was marked by the sound of ringing phones.

“The moment we announced that Albemarle had decided to not proceed and withdraw, the phone started ringing again from customers, from joint venture partners around our downstream strategy,” says Liontown chief Tony Ottaviano.

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“That is an indication that, whilst the current market has come off a bit, the medium to long term is still strong.”

Monday’s action in that quiet corner of West Perth illustrates how the demise of the $6.6 billion Albemarle bid is not so much the end of something, but the beginning of a new game.

After exactly one year of posturing and positioning around Albemarle’s interest – which began with an offer on October 20 last year to buy the company for $2.20 per share – the players in the battle for Liontown are back to something resembling square one.

It’s all up for grabs once more.

But in the year since Albemarle first privately signalled its interest to Liontown, the context of this game has changed dramatically.

The type of lithium-rich spodumene concentrate that Liontown plans to start selling next year was fetching about $US2200 a tonne on spot markets this week.

All price providers agree the same commodity was fetching more than $US6000 a tonne at the start of the year and some believe it peaked at $US8000 a tonne.

Spodumene prices were still about $US5000 a tonne when Albemarle’s third bid was rejected on March 27; that was the point at which Albemarle’s interest was made public.

Mrs Rinehart started buying Liontown shares a week later on April 3.

If analyst consensus is correct, prices will be lower again by the time Liontown starts selling lithium from its Kathleen Valley mine in mid-2024.

JP Morgan predicts spodumene prices will average $US1950 a tonne next year and $US1800 a tonne the following year before sliding to $US1551 a tonne in 2027 under the weight of excess lithium supply.

Not everyone is bearish; RBC expects spodumene prices to average more than $US2800 a tonne through the next two years.

But most analysts believe a supply surge will weigh on lithium prices for the next year or so, and the mood wiped more than 15 per cent off the value of Albemarle shares this week as analysts forecast lower earnings for coming years.

Australian lithium stocks like Allkem, Pilbara Minerals and Global Lithium all lost between 5 per cent and 10 per cent of their value over the past week.

But Mr Ottaviano urged investors not to be discouraged.

“Keep the faith, because whilst you might have the short-term price correction, the medium to long-term fundamentals are still very, very solid,” he told AFR Weekend.

“If you look at what supply needs to come on in the next three years [to keep pace with rising demand for lithium], there are 42 projects that need to come on. More than 50 per cent of those are Chinese-owned and I know how tough it is bringing on capacity.”

Plenty of faith was shown in Liontown as the week dragged on; lenders and shareholders agreed to pump $1.1 billion of fresh cash into the company on Thursday to ensure it had enough money to complete construction of Kathleen Valley.

The $1.80 issue price for the new Liontown shares agreed to this week was 40 per cent below the $3 per share that Albemarle was willing to pay before Mrs Rinehart complicated the process by building a potential blocking stake equivalent to 19.9 per cent of the company.

But it was still 17 per cent higher than Liontown’s share price on March 27; the last time the market traded without knowing Albemarle’s interest.

By Friday afternoon, Liontown investors’ faith was on full display; the stock was 10 per cent above Thursday’s offer price at $1.98 per share.

Liontown Resources chairman Tim Goyder. Trevor Collens

Demise of the Albemarle bid means Liontown chairman and substantial shareholder Tim Goyder is no longer a paper billionaire.

Goyder was ranked 130th on the Financial Review Rich List in April; by Friday morning his net wealth was closer to $745 million, putting him closer to 187th on the Rich List as it stood in April.

He may have lost his membership to the billionaire club, but Goyder was still driving a slick Porsche Taycan as he commuted to his office on West Perth’s Hay Street on Friday.

The licence plate still proudly carried the letters LTR in tribute to the ASX listing code of the brightest star in his stable of critical minerals companies.

“It has been a rollercoaster week,” said Goyder on Friday.

“We have done a magnificent effort to pivot from a Sunday night phone call from Albemarle into putting away the finance for $760 million and getting an equity raising away.

“I think it’s a magnificent effort by our team, our advisers and the asset.”

Albemarle’s decision to walk away from Liontown has also caused some paper losses for the Rich List’s top seed; Mrs Rinehart has spent about $1.3 billion on Liontown shares since April 3.

Virtually all of her 19.9 per cent stake in Liontown was bought at prices above $2.50 per share and most of it was bought in September and October at prices close to $3 per share.

Rich List estimates suggest Mrs Rinehart’s paper losses on her Liontown stake were close to $400 million on Friday.

That’s small beer for someone whose fortune was estimated at $37.4 billion earlier this year.

Hancock Prospecting declined to provide official comment on the Liontown fundraising on Friday, but sources confirmed Hancock did subscribe for its allotment of shares and will therefore continue to own approximately 19.9 per cent of Liontown.

Some east coast bankers were also understood to be in Perth this week talking to Hancock Prospecting about its longer-term lithium strategy.

What happens next is unclear, although it would appear Mrs Rinehart cannot seize on Liontown’s freshly diluted share price with an opportunistic takeover bid.

Under the “minimum bid price rule”, any takeover bid must match or exceed the highest price paid by the bidder for the relevant stock in the previous four months.

That means Mrs Rinehart would need to wait until February if she wants to make a takeover bid for Liontown that is steeply below the $3 per share range.

Many inhabitants of West Perth reckon another Perth billionaire, Chris Ellison, will eventually have something to do with it.

Mr Ellison and Mrs Rinehart have a track record of working closely; Mineral Resources provides crushing and screening services to Mrs Rinehart’s Roy Hill iron ore mine and their companies are partners in a Port Hedland port capacity expansion.

Mr Ellison effectively handed Mrs Rinehart control of Warrego Energy earlier this year when he sold Warrego shares into Mrs Rinehart’s offer at a lower price than he paid for them three weeks earlier.

Mr Ellison’s company Mineral Resources has managed to own, operate or indirectly influence the majority of Australia’s lithium mines and lithium prospects.

Mineral Resources is the operator and half-owner of the Wodgina and Mt Marion mines and is close to buying the Bald Hill mine out of liquidation.

The company also has strategic positions in most WA lithium explorers; 10 per cent of Global Lithium, 17.4 per cent of Delta Lithium, 19 per cent of explorer Essential Metals, to name just a few.

A company backed by Mr Ellison, Develop Global, had designs on providing underground mining services to Liontown until it pulled out of the race in what appeared to be a disgruntled mood.

Mineral Resources would not be bound by the minimum bid price rule, unless it were secretly buying Liontown shares in the past four months.

Could the new company registered by Mrs Rinehart on Monday afternoon – Hanrine Future Metals – have some link to Liontown’s future?

Hancock Prospecting declined to comment on that too.

Goyder says the post-Albemarle era won’t mean a switch to “Plan B” for Liontown; rather he reckons the company can now focus on “Plan A”.

“We set out to build this project and the company, and we got interrupted,” he said of the past year’s takeover drama.

“We have a world-class asset, it is fully funded and we will be in production in about eight months time.

“We are 150 per cent focused on doing that.”