Gina Rinehart muscles in to crash the WA lithium party

It may seem counterintuitive for someone to buy shares in a company and trash talk it at the same time. But in the world of high-stakes takeovers, strategies can require some deciphering. And as Australia’s wealthiest person, Gina Rinehart, attempts to deal herself into the nation’s lithium market corporate play, she is exhibiting a mean poker face.

Rinehart is in the throes of gatecrashing US giant Albermarle’s $6.6 billion takeover of West Australian lithium hopeful Liontown. If successful, she could emerge as one of the major players in the development of the metal that is pivotal to the batteries-led energy transformation.

Cashed up from decades of mining iron ore, the big mining players are using their engorged balance sheets to get a foothold in the emerging commodities that will be key in future decades. And now is the time that those with the capital to play the long game are establishing strategic pillars.

The Liontown board seemed pretty happy with the Albermarle proposal – it was predisposed to favour the $3-a-share price and had offered its suitor exclusive access to books as shareholders were limbering up for a nice payday.

Enter Rinehart’s Hancock Prospecting, which over recent weeks has been staging raids on Liontown’s stock and by Friday had amassed a holding of close to 13 per cent and paid about $850 million to get a seat around the negotiating table.

The Albermarle deal requires 75 per cent of shareholders to vote in favour and given that not all shareholders bother to vote, Rinehart would need to buy only a couple of additional percent of Liontown to block the deal.

Everyone involved in the transaction has been left puzzling about Rinehart’s motives. A rival takeover is always a possibility, but the smart money is discounting this theory because she is buying stock at the same price proposed by Albermarle.

The Rinehart tactic to date has been to buy shares and, at the same time, question Liontown’s ability to finish and operate its marquee underground lithium mine, Kathleen Valley. By inserting herself into this deal, Rinehart is setting herself up as kingmaker in Western Australia’s emerging lithium market, alongside fellow Perth mining magnate Chris Ellison.

The pair has some history in working together and they have resources to see through the volatile lithium price to get a foothold on the future-facing metal used in batteries.

There is a well-documented history of West Australian billionaires squabbling rather than working together, but Ellison and Rinehart have remained the exception to date.

Only a few weeks ago, Ellison’s Mineral Resources cemented its influence over Delta Lithium amid a major boardroom shake-up after which the company’s executive chair stepped down.

Hancock does have its own lithium prospects in the area surrounding Kathleen Valley, including the Mount Ida project that it co-owns with Delta Lithium.

Hancock has hinted at the potential to get into Australia’s lithium downstream processing, where Albemarle has committed to spend $4 billion to become one of the biggest players in that local sector.

Meanwhile, Rinehart’s Hancock cast doubt on whether Kathleen Valley could be delivered on time and budget, and operated successfully without its help. Hancock suggests its expertise (which is in mining iron ore) would be the antidote to any Kathleen Valley shortcomings. (None of which is an issue for Liontown shareholders, who would have cashed out if the Albemarle takeover was successful.) And Rinehart made much of a relatively small increase in project costs and has declared the project risky.

Fortescue’s Andrew Forrest is another billionaire who has regularly brandished his credentials as a master of mining project development to win support for plays in future-facing metals. He outspent BHP to win Canadian nickel hopeful Noront Resources, but he lost out to Mike Cannon-Brookes to take the reins of Sun Cable.

The Rinehart Liontown scenario has a way to play out, but this takeover by Albermarle probably can’t get done without Australia’s most muscular billionaire getting in on the action.

If it requires her spending another $10 million or $20 million to get it done, that’s small change for Rinehart.

From today's SMH/Age