Market Open Radar: Liontown’s Kathleen Valley suitors weigh in

Market Open Radar: Liontown’s Kathleen Valley suitors weigh in

October 10, 2023 Off By Amanda Ellis

A popular company on people’s radar this year is Liontown Resources and its company-making takeover bid from US lithium giant Albemarle. 

Billionaire mining magnate Gina Rinehart has taken a close-to-biggest stake the company and has turned commentator on its Kathleen Valley lithium mine project too. 

We take a took at Liontown, its investors and its flagship Kathleen Valley lithium project. 

A takeover target 

Kathleen Valley lithium mine modeller and developer Liontown Resources (ASX:LTR) has added 120% to its share price this year on becoming a takeover target of a US major. 

The 17-year-old Western Australian company’s board has accepted a $6.6 billion takeover bid from US lithium giant Albemarle (NYSE:ALB) that values shares at $3 a pop. 

Albemarle holds a 4.37% stake in the stock currently trading at the $3 offer price. But Albemarle’s latest bid for Liontown (the first $2.50-a-share bid got kicked to the curb) has been disrupted by WA mining magnate Gina Rinehart. 

Rinehart’s privately held Hancock Prospecting has built a 14.67% stake in the company in recent times, attracting concerns about the effect she could have on the mine-making takeover bid. 

Only Liontown executive chairman Thimothy Goyder holds more shares, with a 14.97% stake, although punters have tipped further buy-ins from the Hancock family outfit that may give them a seat at the boardroom table. 

Albemarle has been undertaking its due diligence on an exclusive basis for the past month and may report its findings anytime from next Monday. 

Project upside

Liontown’s Kathleen Valley lithium project is a tier-1 lithium deposit that has attracted worldwide attention. It has a mineral resource of 156 million tonnes at 1.4% lithium oxide and an ore reserve of 68.5Mt grading 1.34% Li2O. 

The project is in an established WA mining region about 60 kilometres north of Leinster and 680 kilometres north-east of Perth. 

Mine production is tipped to start in mid-2024, to produce 3 million tonnes of spodumene concentrate a year, which would make Kathleen Valley one of the biggest lithium producers in the world. 

Liontown has long-term supply contracts with major lithium users, including Tesla and Ford Motor Company. The manufacturing vehicle customer contracts are likely to provide Liontown with steady income to back its growth plans. 

The company hopes to up production to 700ktpa spodumene concentrate six years after it hits go at the mine. 

When operating the mine is expected to provide more than 250 jobs at the operation, as the company’s revenue brings in taxpayer dollars to the country and royalties to its home state. 

Key issues

Albemarle may come back with issues after its due diligence evaluation of Liontown or the Hancock family influence may change the dynamic forever for executing a mine development plan. 

The Hancock family could push for a seat at the boardroom table, which may prove contentious given Hancock past criticism of Kathleen Valley downsides. Among these are “significant execution, operational ramp-up and market risks” and:” productivity, design, quantity and schedule risks largely remain(ing) with Liontown.” 

Some shareholders now oppose a $3-a-share or near-on takeoffer, writing to the company this week with their concerns. 

The estimated capital cost for the mine is now 6% pricier at $951 million, attracting criticism and counterclaims the true cost is likely to be in the billion-dollar mark. 

Next week may prove a turning point for the company’s future. So keep an eye on the radar. 

Read the previous Market Open Radar:  MinRes debuts Delta mission to add Bald $1.3b to war chest 

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