Liontown Resources (ASX:LTR) Ltd played hard to get with the world’s largest lithium producer, and investors have rewarded the company for it.
The Australian developer turned down a A$5.5 billion ($3.7 billion) cash offer from Albemarle, according to reports, and its shares shot up nearly 70% to A$2.57 (a record high) in Sydney and 63% to US$1.67 in New York.
Shares have continued to climb Wednesday, to A$2.59 and US$1.73.
Albemarle’s offer valued all of Liontown’s equity at A$2.50 a share, the third bid it has made in a span of five months.
What makes Liontown so appealing as a target for acquisition is its ownership of one of the most promising early-stage lithium projects in Australia and the world’s top lithium explorer. The company also has supply agreements with major automakers such as Tesla Inc (NASDAQ:TSLA) and Ford Motor Co.
In its rebuff of Albemarle, Liontown pointed to a fivefold growth forecast for global lithium demand by 2030 and a predicted supply deficit.
“Albemarle is prepared to engage immediately in discussions with Liontown to work toward a mutually acceptable definitive agreement,” the US-based miner said. Liontown’s board had “not meaningfully engaged,” it added.
Albemarle has been working to expand its output, including investing in new facilities, in order to meet long-term projected demand for electric vehicle batterie and meet President Joe Biden’s call to ensure suppliers favor production in the US or free-trade partner nations.
Albermarle has a major presence in Australia already, owning stakes in two major hard-rock lithium mines and a recently completed lithium hydroxide refinery south of Perth.
The deal could be beneficial for Liontown, according to a Citigroup analyst. The company’s mine at Kathleen Valley is a “unique, long-life project” in Western Australia that could increase its production more quickly if held by a company with a larger balance sheet, the analyst said.
Contact Andrew Kessel at andrew.kessel@proactiveinvestors.com
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