• Liontown Resources shares surge as potential blockers muscle in on Albemarle takeover
  • Vale maps out future of iron ore as it seeks quality and quantity
  • Red 5 rises on reserve and resource update at King of the Hills


We’d all assumed no one would be bullish enough to go over $3 on Liontown Resources (ASX:LTR), but Albemarle may be pressured to throw some sugar on its latest bid for the Australian lithium developer despite declaring its offer on Sunday as best and final.

That is if no rival offer emerges.

The Albemarle deal, which Liontown’s board plans to accept should it become binding after due diligence, values Liontown at $6.6 billion – almost twice as high as its trading range before the US lithium chemical giant lobbed a rejected offer of $2.50 per share in March. After an initial kick on Monday, Liontown’s shares had plateaued with the market appearing to accept the Albemarle takeover was as good as it gets.

Not so now, with a massive trading day of around 93 million shares suggesting a big player is building its stake ahead of a planned block or potential rival offer.

The Australian’s Dataroom column fingered Gina Rinehart’s Hancock Prospecting as the likely main bidder with one of her common brokers Euroz Hartleys believed to be on the trade. The aggressive buying pushed Liontown shares up 9% to $3.02, meaning some sellers are already obtaining the price of the Albemarle offer.

It shows the battle is not yet won for Albemarle, which is desperate for long-dated resources to boost its processing operations in Australia. It has already commissioned a doubling of its Kemerton lithium hydroxide plant in WA’s South West, which will be fed from its 49% share in the Greenbushes mine down the road, the world’s largest spodumene producing operation.

The construction of the $895 million Kathleen Valley is most of the way there, with the 500,000tpa spod mine (550,000t according to presentations from Albemarle), the world’s first underground lithium operation, expected to be producing concentrate from mid-2024.

It could ramp up to 700,000tpa of SC6 lithium concentrate in a second stage.

But there has been an absolute smorgasbord of lithium M & A in recent times as global giants vie for supremacy in the battle to supply the electric vehicle revolution.

Allkem (ASX:AKE) plans to create the world’s third biggest lithium producer via a $16 billion merger with America’s Livent, while SQM is chasing all of Azure Minerals (ASX:AZS) after the billion-dollar-plus junior made the massive Andover discovery near Roebourne in WA’s Pilbara.

Chris Ellison’s MinRes (ASX:MIN) has stakes in regional players Delta Lithium (ASX:DLI), Global Lithium Resources (ASX:GL1) and Develop Global (ASX:DVP) in the Goldfields and could emerge as the king in a consolidation of that region’s lithium industry after being revealed as the likely winner of the battle for the operating Bald Hill lithium mine this week.

Rinehart, meanwhile, is exploring for lithium in a farm-in with ASX minnows Legacy Iron Ore (ASX:LCY) and Hawthorn Resources (ASX:HAW) in a bid to supply India’s future lithium needs.


Liontown Resources (ASX:LTR) share price today



Vale’s future plans are long on high grade iron ore

Vale has dialled back its long-term production growth plans but focused on a flight to quality in a hint of the steel industry’s coming reckoning with its emissions intensity.

Steel production is responsible for around 8% of the world’s CO2 emissions, but is a critical component of the technologies like renewables and EVs that are required to help reduce the world’s greenhouse gas fumes.

Most mills remain wedded to the blast furnace route, especially in the industry’s growth engines of China, India and South East Asia, the highest emitting of all steel production routes. And while direct reduced iron and electric arc furnace steel producers are out there, the availability of the ultra high grade iron ore or scrap steel needed to feed them falls well short of requirements to currently scale up those sectors.

Vale, which sparked the last bull run in iron ore after slashing production following the tailings dam disaster at Brumadinho in 2019, has recovered production to 310-320Mt, but has now ditched its long term aim of hitting output of over 400Mt.

Now its latest investor presentation shows the Brazilian iron ore, nickel and copper giant wants to increase output to 340-360Mt by 2026 and over 360Mt from 2030 on.

But one of its biggest targets is a push to ramp up the production of high grade iron ore. High grade agglomerates like direct reduced iron pellets will left from 36-40Mt currently to 50-55Mt in 2026 and 100mt in 2030, pushing the miner’s average grade up from 62.4% to 64% Fe from the end of the decade, set up for the rise of the green steel industry.

Its premiums, Vale projects, will go from an average of around US$4/t today to between US$18-25/t by 2030. Key will be expansions at its Serra Norte mine (at 120Mt, the largest in the world) and Serra Sul, where the S11D deposit was expanded last year.

Another expansion to 120Mt is due in 2026, with the development of the nearby S11C deposit planned after 2030. That would take output in the miner’s high grade northern system to 240Mtpa and beyond.

While Vale is the only player internationally that rivals the scale of BHP (ASX:BHP) and Rio (ASX:RIO), it’s costs are far higher.

Vale sees higher volumes and premiums diluting its cost base from US$52-54/t to US$42/t in three years, while steel demand — at least as far as Vale is concerned remaining strong. While Chinese tonnages could fall from 1Bt in China to 940Mt by 2040, Vale believes emerging regions like India and SE Asia will propel overall output up from 1.887Bt in 2022 to 2.3Bt in 2040.


And what’s doing on the markets?

It’s a false read today with BHP going ex-div, with the mega miner’s 5% drop putting paid to hopes of a good day for the materials sector, down 3.17% today.

Lithium stocks didn’t help. All bar Liontown add a fat ‘L’ with only Azure, Evolution (ASX:EVN) and a rebounding Chalice Mining (ASX:CHN), up over 7% today after cratering on the release of its Gonneville scoping study last week, delivering solid gains.

Heading further down the food chain it was a good day for $830 million capped gold producer Red 5 (ASX:RED), which rose more than 4% after releasing an updated resource and reserve for its King of the Hills gold mine near Leonora in WA’s northern Goldfields.

Over 75,000m of underground drilling and 137,000m of open pit grade control drilling was factored into the update, giving KOTH a total measured indicated and inferred resource of 96.5Mt at 1.4g/t Au for 4.5moz of contained gold, 3.2Moz in the open pit with measured ounces up 185%, important for FY24 and FY25 mine planning.

The underground resource of 1.2Moz included a 102% lift in indicated ounces, while the ore reserve was increased to 69.5Mt at 1.1g/t for 2.5Moz, including a 191% increase in proved open pit reserves. The nearby Darlot gold mine saw a 117% increase in reserves after depletion to 1.4Mt at 2.5g/t for 114,000oz, containied within a broader mineral resource of 16.6Mt at 3.3g/t for 1.8Moz, taking total resources to 6.2Moz.


Monstars (& Red 5) share prices today