Ground Breakers: Albemarle is back for Liontown with a $6.6bn offer and this time it's game on

Albemarle lobs $3 non-binding bid for Liontown Resources, valuing the former penny stock at $6.6 billion
Liontown’s Tim Goyder led board knocked back three bids at $2.20, $2.35 and $2.50 but plans to accept the new offer
The US giant is desperate for large scale resources as it expands processing capacity for EV lithium chemicals

Albemarle is back with a bid valued at $6.6 billion for Liontown Resources (ASX:LTR), a $3 per share offer the Kathleen Valley mine owner’s Tim Goyder led board looks ready to accept.

In an announcement to the ASX this morning, the Liontown board declared it had decided to grant limited exclusive due diligence to the US lithium giant, whose boss Kent Masters last week made a flying visit to Perth, where Liontown is headquartered.

A scheme at $3 would represent an outrageous 14,900% gain for shareholders who bought into the lithium developer, which hopped into the ASX 100 for the first time just last week, at 2c in 2019 when the lithium industry was on its knees.

After rejecting bids at $2.20, $2.35 and $2.50 in March for the company and its $895 million, 500,000tpa Kathleen Valley operation in WA’s Northern Goldfields, Goyder and CEO Tony Ottaviano’s Liontown finally looks like it’s ready to settle with the Greenbushes owner.

“Should Albemarle make a binding proposal at $3.00 per share,subject to agreement of a mutually acceptable binding scheme implementation agreement, the intention of the Liontown Board is to unanimously recommend shareholders vote in favour of the proposal in the absence of a superior proposal and subject to an independent expert concluding (and continuing to conclude) that the proposed transaction is in the best interests of shareholders,” the company said this morning.

“Liontown notes that there is no certainty that the Revised Indicative Proposal will progress to a binding offer for consideration by shareholders.”

The bid comes in at almost double the $1.53 price Liontown was trading at on March 27, before the initial Albemarle offers were revealed to the ASX.

So why is Albemarle all gooey-eyed?

There aren’t a lot of Tier-1 lithium resources and Kathleen Valley is one of a handful in hard rock lithium’s only tried and tested jurisdiction, WA.

Albemarle already owns 49% of the Greenbushes lithium mine — the world’s biggest with output of around 1.5Mt of spodumene in FY23 — and completed the construction of two trains at its Kemerton lithium hydroxide plant near Bunbury in 2022 at a cost understood to be over US$1.5 billion.

A similar outlay is expected on two more trains already approved a year ahead of a planned FID in May this year to double the Kemerton facility to 100,000tpa.

It comes ahead of what Albemarle boss Masters last week said would be a fivefold lift in lithium demand by 2030, steeling the miner and chemical producer’s conviction in tying up large, long life resources like Kathleen Valley.

While the project is intended to be in production by mid-2024 and remains on schedule, Liontown has faced the prospect of raising additional finance for the build, which rose in price from $473 million in a 2021 DFS to $895m in an update earlier this year.

More capex increases have been flagged, with Goldman Sachs analysts expecting the final cost to run to over $1b and the company locking up a letter of support for up to $300m of funding from the export credit agencies of Australia, South Korea and the USA.

It is also targeting DSO shipments late this year to add to finance from carmaker Ford announced in 2022.

Kathleen Valley boasts the fifth largest resource of any hard rock lithium asset in Australia at 5.4Mt lithium carbonate equivalent, behind only Wesfarmers (ASX:WES) and SQM’s Mt Holland, Albemarle and MinRes’ (ASX:MIN) Wodgina, Pilbara Minerals’ (ASX:PLS) Pilgangoora and Greenbushes.