Liontown Resources shares thundered back to pre-bid earth yesterday as the one-time lithium takeover target wrapped up a $1.2 billion debt and equity raising.
On a day when bullion bulls celebrated a fresh Aussie gold price high, it was lithium that again dominated all market conversations.
Liontown’s return to share trading (after a three-day voluntary suspension) capped a remarkable week in Western Australia’s lithium sector, which proved that even though the benchmark price for this key battery commodity is off 75 per cent from its November peak the world’s appetite to build strategic positions in the next generation of mining assets has not eased.
Liontown (ASX: LTR) was forced into the debt and equity raising when suitor Albemarle Corp (NYSE: ALB) pulled the plug on its $6.6 billion cash takeover bid – and removed the artificial $3 a share valuation. Liontown’s stock was always going to collapse towards the $421 million equity raise’s highly discounted price of $1.80. The stock dropped 32 per cent to $1.90.
Attention now turns to what 19.9 per cent shareholder Hancock Prospecting, as Liontown’s takeover wrecker, does now.
While Hancock’s motives remain unclear, what does not is the strong interest in lithium assets – like Liontown’s Kathleen Valley mine-in-development in the northern Goldfields – as players look to secure a longer-term supply of the battery ingredient.
It explains why Liontown was not the only WA lithium game in town this week, even if it attracted most of the headlines, and why the record gold price barely raised a mention.
Aussie gold soared to new records – depending on which market you look at, the new record is $3086 per ounce (according to Melbourne consultancy Surbiton Associates) or $3143/oz based on the spot price listed by The Perth Mint yesterday. Either way, we are in unchartered gold boom territory, so what better time to be producing ounces.
Northern Star Resources (ASX: NST), reporting on a solid if unspectacular September quarter on Thursday, highlighted where gold prices are going by disclosing it had locked in hedges for 330,000oz at $3314/oz. Northern Star is one of few top-tier gold miners that hedges part of its production.
Next Thursday Gold Road Resources (ASX: GOR), which is unhedged, reports its September quarter result and will no doubt talk up its exposure to a rising bullion price.
But back to lithium. Naturally.
While Albemarle was this week administering last rites to its Liontown takeover offer, it was also completing the restructure of the MARBL joint venture with Mineral Resources (ASX: MIN), which seemingly took forever and many iterations.
As a result, Albemarle regains 100 per cent of the almost-finished Kemerton lithium hydroxide plant near Bunbury in WA’s South West and moves the ownership structure of the world-class Wodgina lithium mine in the Pilbara to 50-50, with MinRes the operator. MinRes also collects a decent lick of “adjustment” cash from Albemarle.
MinRes, meanwhile, on Wednesday played kingmaker in another lithium M&A piece by backing Develop Global’s (ASX: DVP) $152 million scrip takeover offer for Essential Metals (ASX: ESS). MinRes was Essential’s largest shareholder, with 19.5 per cent, and is also one of Develop’s largest investors. And MinRes’ Mt Marion lithium mine and the almost-acquired Bald Hill operation are not far from Essential’s Pioneer Dome lithium deposit, in the southern Goldfields.
And the fourth strategic lithium transaction to occur this week happened on Tuesday when St George Mining (ASX: SGQ) announced it had secured a $3 million investment from Amperex Technology to help fund lithium exploration on tenements, in the same part of the Goldfields as the aforementioned Mt Marion, Bald Hill and also Wesfarmers’ (ASX: WES) half-owned Mt Holland mine-in-development.
Amperex is no household name in WA, even though it is the world’s leading producer of lithium-ion batteries (based on the number of batteries and cells produced in 2022).
Amperex is also a unit of Japanese electronics giant TDK Corporation, so St George has secured a seriously credentialled partner in its lithium hunt.
St George does not have a lithium mine nor – yet – a mineable deposit.
But what the Amperex investment shows is that the collapse in the lithium price has not deterred big players from playing the long game on offer because of global decarbonisation.
St George will start spending Amperex’s money this month when it kicks off field work – including mapping of pegmatites and rock chip and geochemical sampling – to work up a list of priority drill targets to hit with a maiden round of drilling.
To borrow from TDK’s vision, “always take a new step forward with a vision in mind”.