The Australian lithium sector has a remarkable ability to survive the swings and roundabouts of investor sentiment.
At the start of this year, record profits, new projects, high prices and more had many investors and company managements upbeat about 2023.
But after 2022’s boom had continued into early 2023, a big sell off started in late February and continued into March as lithium prices fell in China because of a slowing in sales of EVs, problems some Chinese battery makers had with supplies and demand and suspicions that the lower prices would continue for a while.
And with a big sell off on Monday in the wake of an insider share sale at one major player, another weak week was in prospect.
But hey presto, out of nowhere US lithium giant Albemarle emerged to save the day (for how long we don’t know) with news of not just one offer for Liontown Resources, but a total of three approaches in the last few months.
All of a sudden, boom took over from gloom and doom as the prices of leading ASX-listed lithium players enjoyed double digit gains.
The $2.50, $5.5 billion bid for Liontown was rejected – as one at $2.20 had been last year – but chair Tim Goyder (who was the long-time chair of Chalice Mining until he retired last year) wants to keep the talks alive.
Liontown shares ended at $2.57, up 68%, a sign that the market expects a higher offer from Albemarle or even its erstwhile Australian partner, Mineral Resources (whose shares jumped more than 6% as well yesterday).
The boost to the sector was widespread – Pilbara Minerals shares were up nearly 12%, Allkem shares closed nearly 14% higher and Core Lithium saw its shares jump 15.3%.
“The Liontown Board and its advisers carefully considered the Indicative Proposal and unanimously determined that it substantially undervalues Liontown, and therefore is not in the best interests of shareholders. The Liontown Board has therefore rejected the Indicative Proposal,” Liontown said in a statement to the ASX.
“The Indicative Proposal followed careful consideration and rejection of earlier non-binding indicative proposals received from Albemarle at $2.35 per share on 3 March 2023, and $2.20 per share on 20 October 2022.”
“In coming to its decision, the Liontown Board noted the opportunistic timing of Albemarle’s Indicative Proposal, coinciding with recent softness in companies exposed to the lithium sector and the pre-production status of the Kathleen Valley Project. In addition, the Board observed that the Indicative Proposal does not reflect a number of factors, most notably:
The significant de-risking that has occurred at the Kathleen Valley Lithium Project in recent months, with mining operations commencing, construction progressing to schedule and Liontown remaining on track to deliver first production in mid-2024
Liontown’s extensive growth optionality both at Kathleen Valley – including potential early revenue from Direct Shipping Ore, the recently announced 20% increase in plant throughput rate to 3Mtpa, the direct future downstream participation, and other expansion opportunities being explored – and its broader portfolio including Buldania and the synergies available to Albemarle from merging Liontown with the American company’s existing lithium operations in Australia.
Liontown said shareholders do not need to take further action. It said Albemarle has built a stake of around 2.1% in Liontown.
