Lithium miner Liontown soars because it snubs $3.7 billion Albemarle bid By Reuters

© Reuters. FILE PHOTO: Sacks of lithium carbonate are seen at Albemarle Lithium manufacturing facility in Silver Peak, Nevada, U.S. October 6, 2022. REUTERS/Carlos Barria/

By Melanie Burton and Harish Sridharan

MELBOURNE (Reuters) -Australia’s Liontown Sources mentioned it had knocked again an strategy from the world’s largest lithium producer Albemarle (NYSE:) Corp on Tuesday that valued the lithium developer at A$5.50 billion ($3.7 billion) and despatched its shares rocketing 59%.

Liontown controls two main lithium deposits in Western Australia, together with its flagship Kathleen Valley challenge slated for first manufacturing in mid-2024, which is among the many world’s largest and highest-grade arduous rock lithium deposits.

North Carolina-based Albemarle is the world’s largest lithium producer with main amenities in Chile, China and Western Australia the place it holds stakes in two mines and is constructing a lithium hydroxide processing plant close to Perth.

The takeover strategy might sign the beginning of sector consolidation, analysts mentioned.

Benchmark lithium costs rallied six-fold over the 2 years to November however have since plunged 62%, representing a chance for majors to safe provides for the approaching decade to satisfy surging demand from automakers switching to electrical automobiles.

Liontown has inked provide agreements with Ford Motor (NYSE:) Co, Tesla (NASDAQ:) and the battery unit of South Korea’s LG Chem.

Brenton Saunders, a portfolio supervisor at Pendal Group, mentioned a value evaluation made Liontown look weak.

The price of constructing Kathleen Valley almost doubled to A$895 million from a 2021 estimate amid rising labour charges, Liontown mentioned in January. It warned additional will increase have been attainable however mentioned it didn’t anticipate to want additional funding till the December quarter.

“For Albemarle it is not a riskless deposit. There are a variety of firsts on this challenge, it is an underground lithium mine and the labour market continues to be very tight,” Saunders added.

Albemarle had supplied A$2.50 per share after two earlier affords, Liontown mentioned in an alternate submitting. The strategy represented a 63.9% premium to the ASX-listed firm’s final shut.

Liontown mentioned its board had unanimously decided that the proposal “considerably undervalues” the corporate and was not in the very best pursuits of shareholders.

“There isn’t any apparent synergies that Albemarle has that different miners will not – it is logical that there might be others who’re ,” mentioned Dan Morgan, an analyst at Barrenjoey in Sydney.

Of Liontown’s two prior proposals from Albemarle, the primary supply of A$2.20 per share was on Oct. 20 final yr, and the second of A$2.35 was earlier this month, it mentioned.

Albemarle mentioned its “compelling” bid supplied a cloth premium to Liontown shareholders who would profit from its chemical conversion skills and current hyperlinks with Liontown’s clients. It referred to as for Liontown’s board to meaningfully interact.

Liontown additionally mentioned RT Lithium Ltd, a subsidiary of Albemarle, had constructed a close to 2.2% stake by means of on-market purchases.

($1 = 1.5033 Australian {dollars})

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