Kent Masters, CEO of Albemarle Corporation, confirmed that the battery chemical titan is considering the construction of a new lithium hydroxide plant following its A$6.6 billion acquisition of Liontown Resources Ltd.
Masters also revealed Albemarle's commitment to uphold existing offtake agreements that Liontown has in place through 2030, primarily concerning spodumene extracted from the Kathleen Valley mine in Western Australia.
However, as part of its due diligence, Albemarle is seeking further details on Liontown’s contracts with Ford, Tesla (NASDAQ:TSLA) and LG Energy Solution, which are indexed to lithium hydroxide prices.
Liontown has granted permission for this review.
Looking beyond 2030, Masters disclosed plans for potentially boosting Kathleen Valley's annual spodumene production from 550,000 tonnes to 700,000 tonnes. Albemarle will consider building a new hydroxide plant or augment the capacity of existing ones as part of its downstream strategy.
No cost blowout
In response to questions about potential tension between the two companies during the takeover, Masters dismissed it as speculation, stating, "We negotiated to something that they’re happy with, and we’re happy with. And I think if you look at the valuation, it’s a full offer."
He also noted that capital costs for bringing Kathleen Valley into production within the next 12 months were not expected to inflate significantly.
“I think we’re aligned, and we’re going to move quickly to close this. They want to do the transaction and we want to do the transaction, but we’ve got to work through the due diligence and the detail around that,” he said.
“It’s our scale and expertise that provides some of those synergies that get us above everybody else.”
Regarding the financial structure, Liontown intends to finance the transaction through a mix of bonds, debt and cash reserves. The deal offers a 14.5% premium over Liontown's closing share price on September 1 and is 20% higher than the previously rejected A$2.50 per share offer in March.
Masters' comments were part of his first address to investors and analysts since Albemarle's successful bid for Liontown.
He expressed satisfaction with the deal and its alignment with both companies’ objectives. "It’s our scale and expertise that provide some of those synergies that get us above everybody else," he said.
Albemarle has also endorsed an expansion of its Kemerton lithium hydroxide plant in WA, elevating its downstream investments in the state to more than A$4 billion.
The CEO praised Kathleen Valley as a world-class asset, especially beneficial in the tight labour market of Western Australia, where Albemarle aims to augment its mining capabilities.