One of the world's most acquisitive lithium majors says many of its takeover targets – including those in Australia – are overstating the size of their resources and making acquisitions harder to complete.
US giant Albemarle Corporation reiterated its desire to secure more lithium resources during an investor briefing in recent days, saying it had the capacity to grow organically at its existing projects and make acquisitions.
Albemarle is already the 49 per cent owner of the world's largest and highest grade lithium mine at Greenbushes in Western Australia, and the company named WA alongside Nevada, North Carolina and Argentina as the places it was most keen to grow its lithium footprint.
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lbemarle's chief financial officer Scott Tozier said the company was "very active" in merger and acquisition markets, but was finding that many lithium assets were not as good as they initially appeared to be.
"We have been looking at a lot of different deals. The challenge has been, frankly, valuations are relatively high right now, and secondarily, as you're looking at resources, the public statements being made about resources are often inflated once you get behind the scenes," he said.
"Once you sign the non-disclosure agreement and we get our geologist to talk to their geologist and you start to compare notes, you find out that the asset doesn't have 50,000 tonnes capacity, they may only have 30,000 tonnes capacity.
"So all of a sudden that valuation looks way over-valued." Keen to invest
Albemarle has already completed one acquisition this year, paying $US145 million ($192 million) for Chinese downstream lithium producer Jiangxi Jiangli New Materials Science and Technology.
The deal built upon Albemarle's vertically integrated lithium business, and the company has said it is keen to invest in both upstream and downstream parts of the sector.
"We're going to have a tremendous amount of cash that we can use and plow back into lithium," said chief executive Scott Kissam on Thursday, in reference to Albemarle's plan to use earnings from its bromine and refining divisions to grow its lithium business.
The Charlotte-based company has been rumoured to be interested in several lithium miners in Western Australia, where a rush of lithium supply from spodumene mines is emerging.
The comments come after Albemarle sought approval from the Australian government in recent days for permission to build a new facility near the WA city of Bunbury to convert the spodumene concentrate from Greenbushes into battery-grade lithium hydroxide.
Application documents suggest the plant could eventually contain five processing "trains" and be capable of turning 1 million tonnes of spodumene concentrate into 100,000 tonnes of lithium hydroxide per year.
Albemarle is expected to take a final investment decision and start construction in 2018, with initial production expected from a single processing "train" in 2020.
Battery manufacturers typically want their lithium in either hydroxide or carbonate form, and Albemarle produces both.
Albemarle and Macquarie have both suggested that demand for lithium carbonate should grow from about 200,000 tonnes this year to almost 350,000 tonnes per year by 2021. Bigger slice
Albemarle currently produces about 50,000 tonnes of lithium carbonate per year, but wants to be able to produce 165,000 tonnes per year by 2021.
"If somebody like that is coming in and there is enough demand that it peaks their interest in what is a relatively small market, I think that portends well for us," he said.
Meanwhile, first exports were achieved from Galaxy Resources' recommissioned Mt Cattlin mine, and the Mt Marion mine which is owned by Mineral Resources, Neometals and China's Ganfeng.
Strong prices and rising sales volumes saw Albemarle's lithium sales revenue in the three months to September 30 rise almost 43 per cent higher than in the same quarter of 2016.
Albemarle's New York listed shares have more than tripled over the past 26 months.
AJM Price at posting:
38.8¢ Sentiment: None Disclosure: Held
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