Dear Reader,
It’s been less than half a year since Liontown Resources [ASX:LTR] has been up for grabs.
The initial bid from US chemicals company Albemarle was lobbed back in late March. A telling moment for the lithium market as Albemarle is one of Tesla’s biggest suppliers.
But, that first offer was rejected.
Liontown had the gumption to know that their lithium assets were worth more. And they’ve got more…
Albemarle recently upped its bid, which it says is best and final, to $3 per share. An offer that Liontown’s board would probably be foolish to refuse.
At least, it would’ve been foolish up until trading opened yesterday morning.
Seemingly out of the blue, 93 million Liontown shares were exchanged yesterday. A sum that is 10 times the normal trading volume of the stock for the past 90 days. As a result, the share price is now (prior to market open) trading just above Albemarle’s US$3 offer.
So, what happened?
If the rumours are true, it seems Australia’s richest person — Gina Rinehart — could be making a late counterbid. Because if she is the unknown buyer, then Rinehart may be about to put up a fight for Liontown’s assets…
Lithium scramble
Of course, until an official counteroffer is made, we have no real way of knowing what’s going on at Liontown. All we do know is that it furthers the narrative we’re seeing of desperate bidders trying to lock up key lithium assets.
Allkem’s [ASX:AKE] $16 billion upcoming merger with Livent was by far the biggest development in this vein. A deal that will make the combined entity the world’s third-largest lithium producer.
Don’t be shocked if we see more bids in the near future. Because while demand for lithium is still high, a choppy market has led to some rather cheap valuations.
That’s why Albemarle had to up its bid, and that’s why we may see Rinehart contend with it.
Keep in mind, we could see an explosion in lithium prices fairly soon too. Some analysts are forecasting that the market will be in shortage as early as 2025!
This divide between demand and supply may only get worse by 2030 too. Unless we see some serious effort made in terms of productive output, demand looks all but set to outpace new supply for the rest of the decade.
As for where that demand may come from, well, China is still the obvious answer. I mentioned last week how the Middle Kingdom is already muscling in on this market.
But they’re not the only ones…
Another key player that is on the rise is India. Because while they’ve been slower to get started on their lithium plans, they could quickly become a formidable competitor.
India’s rise
I think this India angle is particularly important when you consider Rinehart’s potential involvement. After all, back in May, she personally met with Prime Minister Narendra Modi.
It’s clear that the two are keen on what the other can offer. That is, a new and fast-growing market for Rinehart, and a stable supply of quality lithium assets for Modi.
That is perhaps where Liontown could come into the mix…
But for India, it’s not just about importing lithium, either.
Last month, the Indian Government passed a law that would allow for foreign investment in local critical mineral projects. Lithium was just one critical mineral among several that was struck from the list of ‘atomic minerals’ banned from private investment.
Now, with this change, many of India’s natural reserves can be bought and sold to the highest bidder. An opportunity that’s clearly designed to spur local production and supply of lithium within India.
It’s just another example of the unquenchable demand for this vital resource.
So, for investors like yourself, it may be time to consider lithium once again. That is, if you haven’t already.
It is certainly a volatile space to invest in, but given the ongoing developments, the long-term outlook is still looking as strong as ever.
After all, if it’s good enough for Australia’s richest person, it’s probably worth a look for yourself.
Regards,
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Ryan Clarkson-Ledward,
Editor, Money Morning
