Giant lithium deal collapses after Australian billionaire Rinehart steps in

Eager to add new supply, Albemarle had pursued its Perth-based target for months, eying its Kathleen Valley project — one of Australia’s most promising deposits. Liontown agreed to the US company’s “best and final” offer of A$3 a share in September — a near 100% premium to the price before Albemarle’s takeover interest was made public in March.

Over the past weeks, however, Albemarle has had to contend with the arrival of combative mining tycoon Gina Rinehart, as her Hancock Prospecting Pty. steadily built up a 19.9% stake in Liontown. Last week, she became the single largest investor, with enough clout to potentially block a shareholder vote on the deal.

Albemarle has now advised Liontown that it will not press ahead, due to “the growing complexities associated with executing the transaction,” the Australian miner said on Monday.

Liontown is the most significant lithium investment to date from Rinehart, who made her fortune in the iron ore mines of Western Australia during China’s infrastructure boom. It comes as the outlook for that steel industry deteriorates, but appetite for battery metals is driven higher by the energy transition.

Hancock declined to comment on Monday, though it said last week that it sought a “prominent influence in Liontown’s future.” The shareholding is currently just below the 20% level that would trigger a mandatory offer.

For now, the collapse of Albemarle’s acquisition leaves Liontown rushing to find an alternative source of capital for its flagship Kathleen Valley project, a development Hancock has criticized and highlighted as carrying “execution, operational ramp-up and market risks.”

Jon Bishop, an analyst at Jarden Securities, said Liontown could find banks less than eager to fund its underground operation at Kathleen Valley, not least given volatile lithium prices — meaning a share sale is likely, adding to pressure on the stock. The miner lost its last bull on Friday and was downgraded by Citigroup Inc. and Goldman Sachs Group Inc. on Monday, according to data compiled by Bloomberg.

Rinehart “can afford to be patient here,” said Bishop, who added that in time there might be scope for “some collaboration” between Hancock and other parties for downstream processing in Australia.

A counter cash bid for 100% of Liontown was unlikely from Hancock, according to Citigroup analyst Kate McCutcheon, who cited the fact that existing offtake agreements were locked in until 2030.

Albemarle, meanwhile, will now be left to find other targets, in Australia and beyond. It has indicated primary targets including lithium resources, processing technology and battery recycling.

Liontown has tapped UBS Group AG to steer a capital-raising push as it seeks to secure funding for Kathleen Valley, according to people familiar with the matter who requested anonymity as the discussions are private. The people didn’t say how much it’s seeking to raise. The stock closed on Friday at A$2.79 a share. Trading is currently halted, after Liontown’s request, as it seeks to finalize the funding.