What does it mean that the world's largest lithium miner, Albemarle, spent 30.8 billion yuan to grab the mine?
Interface News Reporter | Wang Yong
After repeated rejections, Albemarle Corp, the world's largest lithium miner, got its wish and offered to bid 20% higher than in March to win an Australian lithium developer.
On September 4, the board of directors of Australian lithium developer Liontown Resources announced that it supported Albemarle's new offer of A$6.6 billion (about 30.8 billion yuan) for the acquisition of the company, or A$3 per share. This represents a 20% premium to the offer offer in March this year.
In a statement, Liontown said Albemarle had secured exclusive due diligence for a limited period of time and had entered into a mutually acceptable plan implementation agreement.
The news sent Liontown's shares up 11.5% intraday to $2.92, the highest since 14 July, before closing at $2.85, up 8.78%.
Liontown is principally engaged in the production of lithium ore and advanced materials. Guotai Junan reported that the company controls two major lithium mines in WA, including its flagship Kathleen Valley project. The project is scheduled to start production for the first time in mid-2024 and is one of the world's largest and highest-grade hard rock lithium mines.
In August this year, Liontown mentioned in the announcement of the update on the strategy and project progress disclosed that the project has received credit support from relevant government agencies in Australia, South Korea and the United States, and can provide up to 300 million Australian dollars in development support.
In addition, Liontown has launched a downstream strategy, planning to cooperate with Japan's Sumitomo to explore and research the use of lithium concentrate or lithium sulfate produced in Australia in the next two years, and the production of battery-grade lithium hydroxide in Japan, so as to build a lithium battery industry chain in Australia and Japan. At present, the company's lithium concentrate underwriting customers include LG Chem, Tesla, and Ford Motor.
"The game of waiting looks to have paid off. According to Reuters, Citigroup analysts said Albemarle's latest offer is good for the lithium market. Albemarle, the world's largest lithium miner, is willing to pay a premium for more supply, which means it is optimistic about the long-term price of lithium.
Albemarle also said in the announcement that the acquisition will bring an immediate premium to Liontown's investors and is expected to bring significant value creation to Albemarle's shareholders, in addition to expanding its business scale and building a world-class resource base, thereby expanding Albemarle's strong position in Australia, among other things.
Albemarle's plan to acquire Liontown has long been implemented and has been rejected several times.
On March 28 this year, Albemarle submitted a non-binding takeover offer to acquire all shares of Liontown at a price of A$2.5 per share, for a total price of about A$5.5 billion (about 25.6 billion yuan).
At that time, the offer was at a premium of more than 60% to Liontown's closing price of the day, but it was still rejected by Liontown's board of directors. Liontown's board of directors stated, "This proposal significantly undervalues Liontown and is not in the best interests of shareholders." ”
Prior to this, Liontown had twice rejected Albemarle's offer proposals of $2.2/share and $2.35/share. The company believes that the supply shortage, supported by the expected growth in global lithium demand, will lead to continued strength in lithium prices, and that Albemarle's acquisition is timed to be "opportunistic" at a time when contractor shortages are leading to higher development costs.
In March this year, foreign media Australian mining websites quoted industry experts as saying that Liontown made a public takeover offer in October 2022 to stimulate bidder participation to reach the target of $3 per share. Judging from the latest takeover offer, the offer has reached the level of acceptance by Liontown.
Albemarle is the world's largest lithium producer by capacity, followed by Chilean Chemical Minerals and Ganfeng Lithium (002460.SZ).
Headquartered in Charlotte, North Carolina, Albemarle has lithium resources all over the world and has the best lithium assets in the world. For example, 002466.SZ it holds the Greenbush lithium mine owned by Talison in Australia and the Atacama salt lake in Chile, the world's largest salt lake resource with the highest average lithium concentration.
Albemarle announced in August that it would raise its 2023 profit forecast and raise its earnings per share forecast to $25-$29.5 from $20.75-$25.75 on the back of rising global lithium demand.
Over the past year, Australian miners have been insisting on a price increase for lithium.
According to Baichuan Yingfu data, in the first half of 2023, the average price of domestic imported lithium concentrate (5% lithium oxide CIF price) was US$4,634.5/ton, a year-on-year increase of 34.7%. This trend is segregated from the downstream lithium carbonate trend.
More than 80% of China's imported lithium concentrate comes from Australia. According to data from the General Administration of Customs, from January to June this year, China's lithium ore imports were 2.026 million tons, of which 1.736 million tons were imported from Australia, accounting for about 85.7%.
According to data from the Ministry of Industry and Information Technology, the average price of domestic battery-grade lithium carbonate in the first half of the year was 332,000 yuan/ton, a year-on-year decrease of 26.7%.
CICC has analyzed that it is difficult for lithium salt prices to cover the high cost of lithium mines, so it is difficult for Australian lithium miners to maintain their price hikes for a long time. From this point of view, Liontown's acquisition of Albemarle may also be a wise "win-win" strategy.
