Gina Rinehart, executive chairman of Hancock Prospecting
Matt King/Getty Images
The lithium market is heating up, despite some awful recent stock performance.
Privately held Australian miner Hancock Prospecting announced Wednesday it had acquired a 19.9% stake in Liontown Resources (ticker: LTR.Australia), which Albemarle (ALB) is trying to acquire. The drama of the largest lithium miner in the world trying to swallow a smaller rival now has another actor in the scene, and investors can’t be sure of Hancock’s intentions.
“Hancock now looks forward to having a prominent influence on Liontown’s future, as its largest shareholder,” Hancock said in a news release. That statement doesn’t tell investors all they need to know, and the text in the release was less than 50 words. Hancock, controlled by billionaire Gina Rinehart, didn’t immediately respond to a request for comment about its plans for the Liontown stake.
Hancock didn’t immediately respond to a request for comment about its goals. Albemarle and Liontown didn’t immediately respond to requests for comment, either.
The stock market gives some idea about what investors think will happen.
Liontown stock is down 2.7% in overseas trading at 2.92 Australian dollars each.
That is 8 Australian cents below Albemarle’s A$3 bid. If investors expected a higher bid from Albemarle because of Hancock’s involvement, then shares would be up. If Hancock tries to take over Liontown on its own then that’s a bidding war and the price would have to be north of A$3 a share. If investors expected Hancock to play hardball with Albemarle, potentially threatening the deal, then Liontown shares would be lower. Liontown stock was at about A$1.50 before any of the Albemarle acquisition talk was disclosed.
Another option is the deal happens at $3 and Hancock, which makes most of its money in iron ore, is happy to be a partner with Albemarle in the future.
Australia, along with Brazil, are two countries with a lot of iron ore used to make steel.
Albemarle, for its part, is interested in growing its base of low-cost lithium assets around the globe. That’s the reason it’s after Liontown. Hancock’s regional and mining expertise along with its capital could help Albemarle in the long run. It’s just too early to tell if Hancock is making a play fro its own lithium business or wants something else.
Albemarle stock is up about 1% to $ 163.62 in Wednesday morning trading while
S&P 500
and
Dow Jones Industrial Average
futures were both up about 0.2%.
Coming into Wednesday trading, Albemarle stock has dropped about 32% over the past three months, due to lithium prices sliding to $25,000 per metric ton from about $35,000. A year ago, lithium was about $74,000 per metric ton.
Commodity prices are a function of demand, which is strong. Sales of electric vehicles keep hitting records around the globe. But they are also a function of supply and inventories. Lately, Chinese lithium buyers have been working off inventories, putting pressure on prices.
Albemarle, and Albemarle investors, hope pricing trends reverse soon.
Write to Al Root at [email protected]
Read the full article here