SYDNEY: Albemarle Corp, the world’s largest lithium producer, has walked away from its A$6.6bil (US$4.2bil) takeover of Australian miner Liontown Resources Ltd.
The US giant had pursued its Perth-based target for months to add new production, but over the past few weeks, it has had to contend with the arrival of Australia’s richest woman, mining tycoon Gina Rinehart.
Her Hancock Prospecting Pty has steadily built up a 19.9% stake in Liontown, making her the largest shareholder with enough clout to potentially block a vote on the deal.
Albemarle has advised Liontown that its decision to withdraw its proposal was due to “the growing complexities associated with executing the transaction,” the Australian company said in a stock exchange statement yesterday.
The US company’s “best and final” offer of A$3 a share, made in early September, amounted to a near 100% premium to the undisturbed price before Albemarle’s original takeover proposal in March. Last week, it extended its due diligence on Liontown by seven days.
Rinehart, who made her fortune in the iron ore mines of Western Australia, has not provided an alternative to Albemarle’s takeover plan.
Hancock declined to comment yesterday but said in an Oct 11 statement that it sought a “prominent influence in Liontown’s future”.
Her shareholding is currently just below the 20% level that would trigger a mandatory offer.
The billionaire is betting on lithium just as consumption of steelmaking materials in China deteriorates. Meanwhile, the demand outlook for lithium, a key battery ingredient, remains robust, driven by the clean energy transition.
Liontown, whose prize asset is the promising Kathleen Valley lithium project, said yesterday it had requested a trading halt as it seeks to finalise funding.
Hancock has previously criticised Liontown’s development and highlighted “execution, operational ramp-up and market risks”, but has also said it looks forward to participating as a shareholder.
A counter-cash bid for 100% of Liontown was unlikely from Hancock, according to Citigroup Inc analyst Kate McCutcheon, who cited the fact that existing off-take agreements were locked in until 2030, along with the risks associated with ramping up the project.
The miner lost its last bull on Friday and was downgraded by Citigroup and Goldman Sachs Group Inc yesterday, according to data compiled by Bloomberg.
“Rinehart can afford to be patient here,” said Jon Bishop, an analyst at Jarden Securities, who added: “In time there might be scope for some collaboration between Hancock and other parties for downstream processing in Australia.”
Bishop said Liontown could find banks less than eager to fund its underground operation at Kathleen Valley, not least given volatile lithium prices.
He saw the “very high likelihood” of a share sale to fund the development. — Bloomberg
