Liontown Resources’ shares have dropped by 35% as they resumed trading after a merger with US-based chemical manufacturing company Albemarle fell through. Liontown is now seeking alternative funding for its key lithium project.
On Monday, before abandoning the planned purchase, Albermarle valued Liontown at A$3 (US$1.89) a share. As of 11:23am AEDT on 20 October, the shares were trading at A$1.87 apiece. Late on Thursday, Liontown announced it had lined up A$1.1bn ($694m) through equity raising and debt financing to fund its Kathleen Valley lithium project.
Liontown has sought to benefit from an increase in global demand for lithium, a critical mineral with many applications in renewable technologies. Albemarle therefore sought to buy the Perth-based miner to access the growing lithium market. Liontown is set to begin mining Kathleen Valley, one of the biggest lithium deposits in Australia, next year.
Albemarle first proposed to acquire Liontown in October 2022.
However, Albemarle decided to walk away as the deal no longer aligned with its “disciplined approach” to capital allocation.
Specifically, Gina Rinehart, Australia’s richest citizen, waded in and acquired a 19.9% stake in Liontown. She is therefore the single largest investor and could block a shareholder vote on the deal. Albemarle then abandoned the deal, citing “growing complexities associated with executing the transaction”.
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Hebe Chen, analyst at IG Markets, said: “The withdrawal of the US lithium giant is a double-shot disaster for Liontown. The ‘no-other-way-to-go’ new shares plan not only significantly discounts its share value but also exacerbates the financial turbulence that Liontown has endured throughout this year, which is disconcerting for its investors.”
The Kathleen Valley project in Western Australia has cost more than Liontown had anticipated; proceeds from the debt and equity raising will be used to refinance existing debt and complete costs on the project.
Tony Ottaviano, CEO of Liontown, said: “We have ensured an appropriate financial buffer is in place to allow the company to successfully weather any unforeseen issues that may arise.”