End of Liontown bid shrinks Albemarle's options for Australian lithium growth

Albemarle Corp.'s decision to terminate its A$6.6 billion takeover bid for Liontown Resources Ltd. leaves the US miner with scant options to materially grow spodumene production in Australia, one of its top strategic goals.

Albemarle withdrew its nonbinding takeover offer Oct. 15, citing "growing complexities associated with the proposed transaction as a factor in its decision."

Lithium sector sources believe that the hurdle was Hancock Prospecting Pty Ltd., which built up over the past month a 19.9% stake in Liontown. Hancock said Oct. 11 that it paid no more than A$3 per share, the same amount Albemarle was prepared to pay in its final takeover offer.

"What Albemarle does next is a very significant question," but will certainly involve more mergers and acquisitions, Howard Klein, founder and partner of New York-based RK Equity, told S&P Global Commodity Insights. "Albemarle wants [something] big — it needs to be a 100 million [metric] ton-plus resource and relatively near-term production — but there aren't a lot out there."

Six lithium projects in Australia have at least 100 MMt of reserves and resources, according to S&P Global Market Intelligence data.

Albemarle has an "obligation to keep expanding in the lithium space that has become so core to its business model," said Cameron Perks, principal lithium analyst at Benchmark Mineral Intelligence. However, Klein said the company needs to "buy mining expertise" with any transaction.

Liontown came out of a trading halt Oct. 19, announcing it had secured A$760 million in binding debt commitments and will raise about A$376 million in equity for the Kathleen Valley project in Western Australia.

Limited options

A major stumbling block to expanding stakes Down Under is that "anyone who looks like they've got a lithium deposit in Australia has a strategic owner involved in the company — someone who has a blocking stake [for any potential takeover] or a starting position," David Flanagan, former executive chairman of Delta Lithium Ltd., told Commodity Insights. Flanagan held that role at Delta until September, when 17.4% shareholder Mineral Resources Ltd.'s managing director, Chris Ellison, swooped in to become Delta's nonexecutive chairman.

That kind of influence in substantive local lithium plays could make it tough for Albemarle to exert the influence over substantial production that it once did, Klein said, pointing to the Liontown stake held by Hancock owner Gina Rinehart, Australia's richest person.

"The savviness of the way Gina Rinehart and [fellow billionaire] Chris Ellison have played their M&A in taking minority interests and waiting it out" contrasts strongly with Albemarle, which "views the world differently," Klein said.

Another major challenge to Albemarle's plans for Australian growth is that only Kathleen Valley, Mt Holland and Delta's Mount Ida "stand a chance of coming online in 2024," Perks said. This comes despite a "huge number of companies exploring," he said, and after Australia has dominated lithium drilling for the past decade.

Sociedad Química y Minera de Chile SA owns half of Mt Holland, and holds 19.36% of Azure Minerals Ltd., after an unsuccessful attempt to acquire it in August.

Changing tack

Albemarle CEO Kent Masters told analysts Sept. 5 the company was attracted to the scale and quality of Kathleen Valley's spodumene resource, along with "near-term production and executability."

"The appeal of Australia is the political transparency, rule of law, stable jurisdiction, good mining expertise, and [it's] close to China, which is building lots of conversion plants" that will likely be the target of any future production, Perks told Commodity Insights.

Albemarle clearly prefers spodumene operations over brine, according to Klein, yet Perks said the lack of other advanced, significant deposits in Australia means Albemarle is "going to have to change tack and go for an early-stage exploration play," or even go to Brazil or Africa, which would "challenge its risk appetite."

Klein said the desire for nearer-term production could turn Albemarle's attention to Sigma Lithium Corp., which started producing lithium concentrate in Brazil in April; Argentina and Brazil-focused Latin Resources Ltd.; Sayona Mining Ltd., which started process operations in Quebec in March; or Ghana-focused Atlantic Lithium Ltd.

Albemarle's long-term need for more resources also saw it fund Patriot Battery Metals Inc.'s early-stage Corvette project in July.

"What might they go after next? It's not clear what they'll do, but I do think they will focus on spodumene and strong jurisdictions," Klein said.

Hancock Prospecting and Mineral Resources declined to comment for this story, and Albemarle did not respond to questions as of publication time.

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