Liontown raising $365m, priced around $1.80/share

Billionaire Gina Rinehart. Picture: Philip Gostelow/Bloomberg

Liontown Resources shares are looking likely to price around the $1.80 mark as part of an equity raising afoot, now thought to be worth about $365m.

DataRoom understands that 19.9 per cent shareholder Gina Rinehart is believed to be lining up as a participant, with the deal on track to be announced after the market close on Thursday.

If priced at $1.80 per share, as speculated, it puts it at a 35 per cent discount to its last traded price of $2.79 or a 40 per cent discount to Albemarle’s $3 a share offer.

Liontown is working with UBS and Bell Potter to raise money to fund its Kathleen Valley project.

DataRoom understands that Liontown had been testing market appetite earlier in the week, first asking shareholders to buy stock at $2.50 per share, before winding the price back to $2.25 and then $2 in what has been a highly fluid situation.

As of Tuesday, there was talk that the price range was between $1.90 a share and $2.10 a share, and it was looking to raise about $300m, but now will raise $400m.

As of Wednesday night, the range was said to be $2 to $2.60.

About ten per cent of Liontown’s register consists of short sellers.

It comes as the $6.1bn company on Wednesday requested an extension to its trading halt and was suspended until the start of trade on October 20.

Liontown is planning to tap the market to fund its Kathleen Valley lithium project in Western Australia.

US suitor Albemarle abandoned its $3 per share bid for the company this week before the raising plans, valuing the business at $6.6bn, and brokers are moving swiftly to tap the market for Liontown before the share price falls on the deal falling over, according to market observers.

The news Albemarle had walked away came after the business interests of Gina Rinehart amassed a 19.9 per cent stake.

Initially, the chatter was that Mrs Rinehart was not participating in the raise, but as of Tuesday, it was believed that she was committing to take up shares.

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

It has a net present value of $4.2bn.

The initial cost of Kathleen Valley is $895m, but has blown out to $951m.

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

Liontown expects to start direct shipping ore, which will release some early cashflow, from Kathleen Valley by the end of the year, bringing in $150m from the export of between 250,000 and 300,000 tonnes.

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.