Lithium-play Liontown Resources has allowed New York-listed Albemarle into its data room to undertake exclusive due diligence for four weeks, kicking off the $6.6 billion sale of the Perth-based miner.
Albemarle’s$3 per share cash offerwon over the Liontown board led by Tim Goyder last Monday. It made for a 14.5 per cent premium to Liontown’s closing share price on September 1, and 20 per cent higher than the $2.50 offer rejected as far too low in March.
“Liontown and Albemarle have now agreed the terms of that non-disclosure and exclusivity agreement, and Albemarle is expected to commence its due diligence shortly,” Liontown told investors on Monday morning.
Albemarle will also need to seek Foreign Investment Review Board clearance to acquire Liontown, which is opening the Kathleen Valley lithium mine in Western Australia.However, the federal government’sdesire for “like minded” foreign investorsmeans Albemarle is expected to be spared the sort ofresistance from FIRBthat derailed two Chinese attempts to buy domestic lithium assets this year.
Albemarle succeeded in winning FIRB approval when it acquired half of Mineral Resources’ Wodgina lithium mine in WA, adding to its interest in WA’s Greenbushes mine and its lithium hydroxide plants.
The breakthrough with Liontown came after Albemarle boss Kent Masters visited WAlast week and confirmed toThe Australian Financial Reviewhe was keen on a deal.
Albemarle intends to finance the deal through bonds, debt and its cash reserves. The company said the transaction fitted within its investment criteria, even at “trough” lithium hydroxide pricing of $US15-$US20 a kilogram, and represented a return of three times the weighted average cost of capital at $US40-$US45 a kilogram.
Albemarle has signed off on doubling the size of its Kemerton lithium hydroxide plant in WA to 100,000 tonnes a year in a move that will take its downstream investments in the state past $4 billion.
Kemerton is linked to Albemarle’s Greenbushes mine in WA’s south-west, and Albemarle separately has lithium hydroxide plants in China linked to its Wodgina mine in the Pilbara.
Liontown has agreed to a “no talk” and “no shop” process, meaning it will not solicit offers from other parties nor enter into discussions with rival bidders, unless it is in the best interest of shareholders.
