Ground Breakers: Lithium roars back as Liontown hits ATH and cold-shoulders US giant Albemarle’s $5.2 BILLION offer

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• Liontown REJECTS Albemarle’s $5.2 billion bid to take over WA lithium play
• The 63% premium sends the lithium market blazing, with numerous other companies up over 10%
• Chalice Mining surges as it announces partner search for 3Mt nickel equivalent Julimar nickel-copper-PGE project

They say to never look a gift horse in the mouth, a phrase not suited for the hard-headed folks who specialise in M & A defence.

Liontown Resources (ASX:LTR) has, apparently, done so three times, twice on the sly, rebuffing approaches from lithium giant Albemarle which would have valued the Kathleen Valley mine developer at more than it’s ever been worth at $2.50 a share.

American Albemarle, one of the world’s largest lithium producers, would pay $5.2 billion for control of LTR, which wants to open its $895 million Kathleen Valley mine in WA in the middle of next year. That’s a 63% premium over LTR’s last closing price on Monday.

It comes after a $2.20 offer was rejected in October and a $2.35 per share offer was rejected at the start of March, Liontown revealed today. At the same time an Albemarle subsidiary has quietly built a 2.2% stake in Liontown on market.

How interesting.

Liontown was up 51% to $2.30, still well below the rejected offer price, which comes a tidy ~11,500% up on LTR’s 2c offering as recently as four years ago, before the lithium boom began in earnest.

It set the rest of the recently moribund lithium market alight as well, with word the biggest players in the world were offering massive premiums for WA’s lithium reserves setting investors’ hearts on fire.

Look at those lithium plays fly. Pilbara Minerals (ASX:PLS) lifted ~15% this morning, with Allkem (ASX:AKE) up over 13%, Core Lithium (ASX:CXO) surging more than 17%, North America focused Ioneer (ASX:INR), Sayona (ASX:SYA) and Patriot Battery Metals (ASX:PMT) up big and diversified IGO (ASX:IGO) and MinRes (ASX:MIN) gaining in the high single figures.

How did ASX lithium stocks take the Liontown Albemarle bid?

Scroll or swipe to reveal table. Click headings to sort.

Opportunistic?

LTR’s board, which includes chairman and major shareholder Tim Goyder, has called the offer opportunistic, given the hammering lithium stocks have taken in recent month as prices have come down from historic highs.

Liontown shares, which hit a previous record of $2.20 on November 14, had fallen over 30% before today’s news, largely due to the announcement of a $350 million cost blowout at Kathleen Valley.

They say it undervalues “the significant de-risking at Kathleen Valley” and “extensive growth optionality” from early stage DSO and a 20% increase in processing capacity, as well as future downstream processing and expansions like the separate Buldania development LTR has on the backburner.

Liontown also says the bid undervalues the “scarcity value of Kathleen Valley”, one of the few major lithium developments close to production in Australia with an initial capacity of around 500,000tpa spodumene concentrate per year.

There were also “the positive near-term outlook for existing or new lithium producers, underpinned by a forecast growth in global lithium demand of 5x by 2030, with predicted supply deficit that is expected to deliver stronger lithium prices for longer,” Liontown added, as well as “significant synergies” with Albermarle’s operations in Australia.

It is already ramping up the first trains of its 85% owned lithium hydroxide processing plant at Kemerton near Bunbury, and has a 50% stake in the Wodgina mine in the Pilbara, both in partnership with Mineral Resources (ASX:MIN).

Compelling?

Albemarle has hit back already, calling its offer compelling in a release to media, noting it comes in at a 63% premium to Liontown’s March 27 close, 69% premium to its 30-day VWAP, 184% premium to its 52 week low and 41% premium to its median broker price target.

“Albemarle notes that the Liontown Board has not meaningfully engaged with Albemarle to facilitate its shareholders receiving the benefits of the proposal,” the US behemoth said.

“Albemarle believes this is a compelling opportunity for Liontown shareholders and that Liontown’s Board should immediately engage with Albemarle to facilitate a binding offer to be put to its shareholders for their consideration.

“Albemarle believes this offer provides enhanced liquidity and accelerates the realization of incremental value for Liontown shareholders beyond what might otherwise be expected from share price performance over the next few years and without the operating, market, financial and other risks that could impact the value of Liontown.

“Albemarle has submitted this attractive cash offer in advance of Liontown’s completion of the Kathleen Valley project, which allows Liontown shareholders to avoid future risks associated with project development and operations.”

Massive day for Tim Goyder

Tim Goyder shot to fame and fortune after the twin successes of Liontown and Chalice Mining (ASX:CHN) a couple years ago, becoming a paper billionaire off the back of their miracle 2021 runs.

Chalice, where Goyder remains a significant shareholder but is no longer a director, was up more than 8.5% this morning after announcing a 50% increase in nickel equivalent resources at its famous Gonneville discovery near Perth in WA to 3Mt.

The largest nickel sulphide discovery in Australia for two decades, the deposit is part of the 26km Julimar complex that sparked a new exploration rush three years ago on the western margin of WA’s Yilgarn Craton, better known for the gold and nickel found around Kalgoorlie in its east.

The updated resource contains 560Mt of ore at 0.88g/t platinum, palladium and gold, 0.16% nickel, 0.09% copper and 0.015% cobalt for 16Moz of contained 3E PGMs, 860,000t nickel, 520,000t copper and 83,000t cobalt.

“The ~50% increase in the Gonneville Resource to ~3 million tonnes of nickel equivalent is quite a remarkable achievement for the Chalice team given it is barely three years since the discovery of the Julimar Complex. Gonneville is now the second largest undeveloped nickel sulphide resource in Australia,” managing director Alex Dorsch said.

“The latest numbers continue to demonstrate the world-class endowment, scale and quality of the Gonneville Deposit, while also highlighting a compelling picture of upside along the remaining ~28km strike length of the Julimar Intrusive Complex.

“Apart from further increasing the contained metal, this Resource update has also delivered a significant increase in the higher-confidence Indicated Resource component – which now represents ~60% of the open-pit Resource. Importantly, 95% of the Resource above a depth of 200m is now classified as Indicated, which represents a major de-risking step for the Project.”

At the same time, Chalice says a strategic process to find a larger mining and operating partner to tap the project’s full potential is ongoing.

“The continued growth in the higher-grade sulphide component – both in an expanded open pit optimisation and, significantly, in a wide-open bulk underground category, further enhances the significant development optionality of the Deposit – with the updated March 2023 MRE to be incorporated into the ongoing Scoping Study work,” Dorsch said.

“Because of the sheer size and quality of the Resource and the significant level of inbound inquiries we have received from a range of downstream, trading and end-user parties, the Board has decided to commence a formal strategic partnering process for the Julimar Project.

“This process will consider a broad range of potential transactions with the aim of maximising shareholder value and will continue in parallel with the ongoing Scoping Study.”

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