Gina Rinehart’s Hancock Prospecting scoops another $152m in Liontown Resources shares

Miming billionaire Gina Rinehart.

Gina Rinehart’s Hancock Prospecting has built a potential blocking stake in Liontown Resources after dropping another $152m into the shares over the past two days.

In its fourth major share raid, Hancock has bought slightly more than 50 million Liontown shares for a total consideration of $152.2m.

This brings Hancock’s stake in the takeover target to 14.67 per cent, which it is understood could be enough to stymie US battery chemical giant Albemarle’s $6.6bn bid for Liontown, which would need a 75 per cent acceptance of votes cast in favour.

Hancock bought 2.8 million shares at $2.95 on Monday with 47.9 million picked up at the $3 bid price on Tuesday.

Hancock has not signalled whether it intends to launch a full takeover bid for Liontown, but has made it clear it believes it should at the least be a partner in the company’s flagship lithium project, saying its expertise in bringing large projects online would mitigate the risks still to be navigated in bringing Liontown’s Kathleen Valley mine into production.

Albemarle is still doing due diligence on Liontown, and has been silent on Hancock’s share purchases over the past couple of weeks.

Hancock emerged as a significant shareholder in Liontown on September 11, with a 7.72 per cent stake, and then added to that with purchases worth $110m and $132m last week.

At Albemarle’s $3 bid price the Hancock stake is now worth about $970m.

Liontown last week updated shareholders on the progress of its Kathleen Valley project in Western Australia, where capital and operational expenditure estimates both increased by 6 per cent.

While analysts were comfortable with these numbers, Hancock saw the news as more evidence that it would be a better operator for the project.

“Whilst Hancock continues to see Liontown’s Kathleen Valley project as a significant lithium asset, Liontown’s update to the ASX ... reinforces Hancock’s previous observations that the project faces significant execution, operational ramp-up and market risks,’’ the Australian miner said in a statement late on Friday.

“Liontown confirmed a further $56m capital cost increase to $951m, and on a ‘real’ basis which ignores inflation.

“Factoring in inflation over time, the actual capital cost could be in excess of $1bn. This follows Liontown’s prior cost increases, above the $473m estimate from its definitive feasibility study.’’

Hancock also cast doubts on the validity of the updated cost estimates, noting that “the productivity, design, quantity and schedule risks largely remain with Liontown’’.

“Hancock also considers that most cost pressures typically emerge in the second half of the construction of mining projects.

“Liontown’s revised operating cost estimate has increased by approximately 50 per cent from previous estimates. The actual numbers are some time away from being known.’’

Hancock has made no statement in relation to its increased stake, revealed at 6pm on Tuesday, as yet.

Albemarle has not addressed the Hancock share purchases to date in any way. It said in an update to shareholders this week that the transaction was expected to “generate an internal rate of return significantly above Albemarle’s weighted average cost of capital’’.

If a binding bid is issued, Albemarle expects the transaction to close in the first half of 2024, following shareholder approval and relevant regulatory approvals including from the Foreign Investment Review Board.

There is also the prospect of Chris Ellison’s Mineral Resources joining the fray, as it did in the takeover battle for Warrego Energy earlier this year, where it eventually tipped a 19.9 per cent blocking stake into Hancock’s offer, getting it over the line.

MinRes has not made a move as yet, however it would make strategic sense to collaborate.

Hancock currently owns lithium assets near the Kathleen Valley project with its Mount Ida project co-owned with Delta Lithium - which in turn is chaired by Mr Ellison and 14 per cent owned by MinRes.

Liontown shares closed 0.3 per cent lower at $2.95 on Tuesday, with 63.8 million shares traded.