Liontown’s lithium rollercoaster crashes after funding scramble

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Liontown shareholders have endured a chastening session on the market after the lithium aspirant’s share price crashed 32 per cent after a heavily discounted $1.1 billion fundraising.

The WA miner was until recently in the sights of suitor Albemarle, before the growing presence of mining magnate Gina Rinehart on Liontown’s register scared away the US lithium specialist.

Liontown chief executive Tony Ottaviano at the part-built Kathleen Valley mine in August.Credit: Evan Collis

Albemarle’s exit left Liontown looking for funds to complete its flagship Kathleen Valley mine. The US giant was expected to fund the project if it was successful in its bid.

Rinehart has amassed a 20 per cent stake in Liontown, with the Albermarle takeover talk and the interest of the iron ore heiress, sending the miner’s shares on a tear.

When Liontown’s board rejected Albemarles’ third bid of $2.50 a share in March, its shares jumped 68 per cent in a day to $2.57 each. The board’s rebuff looked justified when a fourth bid of $2.92 share arrived in July, which was subsequently raised to $3.00 in September.

Liontown then opened its books to Albemarle for four weeks of due diligence to seal the deal. However, the impending takeover was interrupted when Rinehart, through Hancock Prospecting, revealed she had amassed a stake of almost eight per cent.

Hancock Prospecting subsequently kept increasing its stake – before and after Liontown announced another cost increase for Kathleen Valley, courtesy of WA’s overstretched supply chains and construction workforce – to $951 million.

Albemarle withdrew its offer, noting “growing complexities associated with the proposed transaction”, but did not go as far as to name Rinehart.

With Liontown chief executive Tony Ottaviano facing the prospect of managing a project without sufficient funds to complete it, Liontown has had to scramble to raise new capital for the business.

The money was arranged via a $760 million in debt and $376 million equity raising at the heavily discounted price of $1.80 a share. Liontown’s shares, which had been on a four-day trading halt, plunged as soon as they returned to the bourse on Friday.

Ottaviano on Friday said the miner now had the funds to expand the Kathleen Valley project 700 kilometres north-east of Perth and take it to first production in mid-2024. After Kathleen Valley, Liontown is aiming to develop its Buldania deposit further south.

“Notwithstanding the current challenging market conditions, the placement was met with strong demand, and we have achieved our goal of strengthening our share register with the addition of high-quality domestic and international institutional shareholders,” he said.

Macquarie analysts last month gave some hope of a better market for the vital ingredient for battery production, saying China’s lithium supply is expected to slip into deficit as the country’s refiners cut production.

China produces the bulk of the world’s lithium. “[A] sharp supply cut into peak season could drive a price rebound”, the analysts said in a note.

Liontown shares closed at $1.90 a share on Friday. They traded at $1.53 before the takeover-related spike in March.

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