Liontown Resources Seeks Funding After Albemarle Abandons $4.2 Billion Buyout Bid
Liontown Resources, an Australian lithium developer, has paused trading to secure funding for its primary Kathleen Valley lithium project. This move follows the decision by U.S.-based miner Albemarle to retract its A$6.6 billion ($4.16 billion) acquisition proposal.
The withdrawal by Albemarle was attributed to "growing complexities." This announcement came shortly after Hancock Prospecting, an iron ore mining company overseen by Australia's wealthiest individual, Gina Rinehart, increased its ownership in Liontown to 19.9%. This stake would have likely thwarted Albemarle's A$3 per share bid.
Liontown is now focusing on securing funds for the Kathleen Valley project in Western Australia, set to commence lithium production by mid-next year. Recognized as one of the top five global lithium projects, Liontown has already secured supply agreements with major companies, including Ford Motor, Tesla, and EV battery manufacturer LG Energy.
Despite a 6% increase in its capital cost estimate to A$951 million, Liontown remains committed to its initial production timeline. The company is in advanced talks with lenders to secure a minimum of A$450 million for initial expenses.
An insider, who chose to remain anonymous, indicated that the upcoming funding package would likely encompass an equity raise. Liontown had previously expressed intentions to obtain debt financing from a consortium of banks and government credit agencies within the year.
Brokerage firm Wilsons anticipates an equity raise of A$225 million by the end of the year. Given Liontown's A$6 billion market valuation and projected cash flows exceeding A$500 million by 2025, the nature of the funding is not deemed a significant concern.
While Hancock had previously expressed skepticism about Liontown's ability to meet cost and timeline projections for Kathleen Valley, it had also offered its expertise.
Albemarle's CEO, Kent Masters, stated that the acquisition of Liontown did not align with the company's strategic interests. However, Tim Hoff, a mining analyst at Canaccord in Perth, believes Albemarle may still play a role in the future. He suggests that while the buyout is off the table, a supply agreement and capital commitment might still be on the horizon.
Albemarle refrained from commenting on potential future engagements with Liontown but confirmed that it has adequate resources for its Australian ventures.