Barrenjoey, JPMorgan on board for Albemarle’s Liontown’s $6.6n bid

Liontown Resources chairman Tim Goyder.

Investment bank Barrenjoey has managed to find its way on to the ticket for Albemarle’s $6.6bn sweetened takeover proposal for Liontown Resources, which has been given the backing of equities analysts.

Liontown Resources is working with Greenhill’s and UBS.

Investment bank JPMorgan has been working with the North Carolina-based lithium producer Albemarle for some time, but Barrenjoey had been assisting on other Albemarle assignments in Australia and was brought into the picture on Liontown in the final hour in conjunction with the Wall Street bank.

Albemarle - the world’s largest lithium producer - was understood to have worked with the target over the weekend to come forward with the revised price of $3 per share following earlier offers.

Analysts at Wilsons say that the offer is broadly in line with its valuation of Liontown in May.

Shares in Liontown closed on Friday at $2.62 as Albemarle prepares to conduct exclusive due diligence on the company, with Liontown’s board planning to recommend the offer.

Now the question some are asking is what Albemarle targets in Australia next, with the US resources giant signalling that it is not finished when it comes to deals.

Off the agenda is likely to be Mineral Resources, with the pair’s downstream asset partnership not panned out as well as hoped for.

But logical targets are the $580m Patriot Metals, in which it already owns 4.9 per cent, or the $10bn IGO, its partner on the Greenbushes lithium mine.

The latest play is further evidence the land grab on among the world’s largest lithium producers, as Albemarle’s South American rival SQM has also recently bid for the $1.2bn lithium producer Azure Minerals.

Yet some believe perhaps local lithium players such as Chris Ellison’s Mineral Resources, and Hancock Prospecting and Pilbara Minerals better placed for deals to their foreign rivals due to local knowledge.

MinRes has just purchased the Bald Hill lithium project for about $1bn out of administration, shares in Delta Lithium, Essential Metals and Global Lithium.

Based in Perth, Liontown controls two major lithium deposits in Western Australia – its major project Kathleen Valley in the northern goldfields and Buldania in the eastern goldfields.

The company is 15 per cent owned by chairman Tim Goyder.

Earlier, it rebuffed a $2.50-a-share proposal to buy the company from Albemarle, taking its value to $5.5bn.

This came after a number of earlier attempts by Albemarle to buy the business at lower bids, offering $2.20 per share on October 20 then $2.35 on March 3.

Before Albemarle’s interest was known, Liontown traded at $1.53.

Given the challenges of delivering such a highly complicated project, many have taken the view that a lofty offer from one of the world’s major producers should be taken seriously.

Liontown’s market value has moved from about $200m three years ago to become a business valued at $3.4bn before the Albemarle offer emerged, as it has capitalised on more certainty around Kathleen Valley and the surging lithium commodity price.

On its website, Liontown says 145 million electric vehicles will have taken to the road by 2030 and that it is producing the resources needed to power the vehicles.

Liontown’s Kathleen Valley project will be one of the world’s largest lithium mines, supplying 500,000 tonnes of 6 per cent lithium oxide concentrate per year when it comes on stream in 2024.

Final investment decision approval was given by the board in June last year after signing offtake agreements with Tesla, Ford and LG Energy Solution.

Given the challenges of delivering such a highly complicated project, many have taken the view that a lofty offer from one of the world’s major producers should be taken seriously.

While Liontown says it has a number of funding options, some say that the group’s project was going to be costly and it may have needed to raise capital and highly complex.

At the recent Diggers and Dealers in Kalgoorlie, chief executive Tony Ottaviano, who previously worked at BHP and Rio Tinto, said he did not want to ramp up the Kathleen Valley project without enough working capital.

The project that will start direct shipping ore at the end of the year is set to cost more than 40 per cent more than initially estimated.

Estimates are the lucrative project could make somewhere between $2bn and $3bn in earnings before interest, tax, depreciation and amortisation from year one once it is fully commissioned and processing.

Albemarle Corporation is an American specialty chemicals manufacturing company operating in lithium, bromine specialties and catalysts.