Things Get Hostile In Lithium. Albemarle Sends Liontown Stock Soaring.

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Demand for lithium is growing as more electric vehicles require more lithium-ion batteries to make them go. The growth is causing some M&A action in the lithium industry and lifting shares of small-capitalization, early-stage lithium miners.

Monday evening, lithium miner

Albemarle

(ticker: ALB) disclosed it had submitted another proposal to acquire Australian lithium start-up

Liontown Resources

(LTR.Australia) for 2.50 Australian dollars, or about $1.66, a share.

Albemarle’s latest offer, which is the first publicly disclosed, values Liontown at about $3.4 billion. The miner has two mining projects under development in Western Australia. Production of lithium product suitable for refinement into battery-grade materials should begin around 2024.

Liontown stock rose about 69% in overseas trading to A$2.57 a share, seven cents higher than the Albemarle offer, indicating that Investors expect a higher bid.

So does Liontown management. The company rejected the Albemarle bid as inadequate.

“The Liontown Board and its advisors carefully considered the Indicative Proposal and unanimously determined that it substantially undervalues Liontown, and therefore is not in the best interests of shareholders,” reads part of a statement from the company.

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Liontown had also rejected Albemarle’s earlier bids of A$2.20 and A$2.35 a share.

The repeated rejections might be why Albemarle has disclosed its interest in the miner publicly. “Albemarle believes this offer provides enhanced liquidity and accelerates the realization of incremental value for Liontown shareholders beyond what might otherwise be expected from share price performance over the next few years and without the operating, market, financial and other risks that could impact the value of Liontown,” reads part of its news release.

Citi analyst Kate McCutcheon sees another bid in the offing. She opened an “upside 30-day catalyst watch,” which means McCutcheon believes the stock can go higher in the next month. “We think the offer needs a bump,” she wrote. Her new target price is 2.80 Australian dollars a share, 30 cents above the recent offer and up about 23 cent from where shares are trading.

Albemarle stock is up 0.3% in early trading, reversing losses in the premarket session. Stocks can drop on deals, and investors sometimes fear that hostile bids can lead to overpaying for an asset. The

S&P 500
is down 0.2% while the

Dow Jones Industrial Average
is up about 0.2%.

The $3 billion-plus price tag, however, looks small for Albemarle relative to the size of the overall company. Albemarle has a market capitalization north of $25 billion.

Albemarle has capacity to produce roughly 225,000 metric tons of lithium raw material a year, and plans to roughly triple that by 2030. The Liontown project in Kathleen Valley, in Perth, Western Australia, should be able to produce about 35,000 metric tons of lithium raw materials a year. How much the second project, in Buldania, in Eastern Goldfields Province of Western Australia, will be able to produce isn’t yet clear.

Liontown also is also considering building a refinery that can take the raw materials and produce lithium hydroxide that can be shipped to battery makers.

Shares of other small-cap lithium miners are soaring in response to the Albemarle news. Shares of

Piedmont Lithium

(PLL),

Lithium Americas

(LAC), and

Sigma Lithium

(SGML) are up 6.9%, 4.1%, and 9.9%, respectively.

Lithium Americas will mine a claystone-based deposit in the U.S. Claystone has a lower lithium content than other rock-based resources. Piedmont, Sigma, and Liontown will mine spodumene ore. Sigma has the highest grade indicated in its mining reports of the those three producers.

Write to Al Root at allen.root@dowjones.com