Albemarle abandons Australian lithium deal after billionaire Gina Rinehart builds stake

Albemarle’s $4.2bn takeover of lithium developer Liontown Resources has collapsed after Australia’s richest person Gina Rinehart acquired a big enough stake in the business to block the deal.

US miner Albemarle, the world’s largest lithium producer, abandoned the Liontown deal on Monday, citing “growing complexities associated with the proposed transaction”.

The failure of the deal highlights the growing battle for Australian lithium assets as the world’s largest developers look to boost their capacity. Lithium is a key component of batteries used in electric vehicles.

Albemarle had been working for months to acquire Liontown and its offer was accepted in September. Both Albemarle and Chile’s SQM are already investors in some of Western Australia’s largest lithium projects and have partnered with local players including IGO, Wesfarmers and Mineral Resources to develop projects.

But over recent weeks Australian billionaire Rinehart has built a 19.9 per cent stake in Liontown through her iron ore mining company Hancock Prospecting. Rinehart stopped just below the threshold where she would need to make a counteroffer for the company. However, her stake is large enough to potentially block a vote on the deal.

Albemarle did not directly refer to Hancock’s stake as the reason for walking away from the deal. The US miner’s exclusivity period to complete the takeover had been extended and was set to expire this week but analysts said they did not anticipate Rinehart to make a counteroffer.

Kate McCutcheon, an analyst at Citi Australia, said a takeover bid from Hancock was “unlikely” given the risks associated with getting Liontown’s mine into production.

Rinehart has not commented on the rationale for her move on Liontown.

Hancock said in a September statement that it would look to work alongside other shareholders and that there were opportunities to create “downstream value” in the lithium market in Western Australia, referring to the refining of the mineral once it has been extracted.

For Albemarle, it is strategically important to secure resources to feed its Kemerton lithium processing plant in Western Australia, which it plans to expand.

The North Carolina-based company has repeatedly highlighted that sourcing lithium from Australia, a US free trade partner, will help automakers qualify for US tax credits under the Inflation Reduction Act.

Albemarle’s fourth — and final — bid for Liontown came at a hefty premium, leaving little room for the lithium industry leader to enter a bidding war, especially after prices for the battery material have collapsed by about 70 per cent this year. Analysts said the company could try to buy mining assets in Australia, Canada or Brazil.

Liontown has appointed UBS to raise capital as it seeks to develop its key Kathleen Valley project, with a target of finalising funding this week. The company hopes to raise A$450mn (US$285mn) to get the project into production by mid-2024.

Liontown shares halted trading on the Australian stock exchange on Monday as the company looks to complete a fundraising to develop the mine. The stock was suspended at A$2.79 after the shares drifted below the A$3 level of Albemarle’s offer as the deal collapsed.

Liontown said Albemarle had expressed a “favourable view” of Kathleen Valley and the management team despite walking away from its offer.

Hancock has yet to request a board seat at Liontown and would need to request a special meeting to do so as board nominations for the annual meeting closed last week.