Albemarle has withdrawn its offer for Liontown Resources sending share prices down, leading to speculation as to what Hancock Prospecting will now do with its 19.9% share in the company. 

Hancock Prospecting (“Hancock”) has reached the ownership threshold required to block lithium giant Albemarle’s takeover of lithium developer Liontown Resources (“Liontown”). In under a month, Hancock increased its stake in Liontown from 10.7% to 19.9%. Albemarle, seeking complete ownership of Liontown at a cost of AUD6.6Bn (US$4.3Bn), has subsequently withdrawn its offer. As a result, shares in Liontown dropped by over a third, from AUD2.99 (USD1.89) to AUD1.90 (USD1.20) per share in just 10 days. This latest development adds another chapter to the story that has been developing over the past month.

As Hancock grew its position in Liontown, it became increasingly obvious the company sought to block Albemarle’s takeover bid, with Gina Rineheart, majority owner of Hancock, openly discussing it. When Hancock hit the threshold of 19.9% ownership, this goal was realised. Albemarle would need a 75% approval rate from shareholders for its takeover deal, which was incredibly unlikely and subsequently it withdrew its offer.

Liontown has since offered an institutional placement for AUD365.0M (USD230.2M) worth of shares at AUD1.80 (USD1.14) per share, and a debt funding package of AUD760.0M (USD479.1M). The company says this is to further fund the development of the Kathleen Valley project and refinance its existing debt from Ford Motor Company (“Ford”).

It is now being speculated as to what Hancock’s next move will be, now that it has achieved its goal of blocking Albemarle’s takeover. A likely scenario remains that Hancock will partner with another company to help further develop the Kathleen Valley and Buldania projects under Liontown. This could still be Albemarle, or possibly another developer with experience in the lithium sector. However, there are only a small number of large players in the lithium sector with the technical experience in developing lithium projects and the capital to buy into a large project. Another possibility is that Hancock takes complete ownership of Liontown Resources, having successfully reduced the share price. However, there is inherent risk in this approach. Hancock has never previously developed a lithium mine and concentrator plant. Lithium projects come with a different set of challenges to the coal and iron ore sectors, the traditional areas in which Hancock operates. With Liontown attempting to further fund itself via debt and equity raising, Project Blue believes that Hancock is likely to sit and wait for the project to develop further before weighing its next move, with a joint venture in the longer term still the most likely outcome.