Australia’s biggest business mystery: Gina Rinehart’s lithium plans

Just one month ago Albemarle, global lithium operator and owner of the huge Greenbushes lithium in Western Australia, was on track to take control of its prey, emerging lithium player Liontown Resources (ASX: LTR) and its Kathleen Valley spodumene project near the West Australian town of Leinster.

All it took was Albemarle raising its offer by 20% to $3 per share for the Australian company to agree after having rejected an earlier bid.

And all it took to probably undo the deal was for Australia’s richest woman, Gina Rinehart, to begin buying Liontown shares and continue to do so until she reached 19.9% of the company and its biggest shareholder, so ending up with a blocking stake.

Albemarle’s US$4 billion offer will need at least 75% of the company’s shares to be voted in favour — and usually many shareholders do not vote on such offers.

To take full ownership Albemarle will need to own 90% of the Liontown in order to compulsorily acquire all outstanding shares

Three possible Rinehart strategies

So what is Ms Rinehart up to?

On first glance, this is hardly time to be super-bullish on lithium.

The commodity’s prices have dropped by 70% this year due to a combination of more mines coming into production and output swelling while Chinese demand has been falling off.

In addition, even more mines are in various stages of development, and there’s a long tail of early-stage explorers.

And there is always the spectre of a new — and, importantly, less combustible — non-lithium battery technology proving technically and financially feasible.

Albemarle is the world’s largest lithium producer and this week requested and was given a one-week extension to its due diligence deadline.

Albemarle’s Greenbushes mine is a hard rock, open pit mine located 90km southeast of the port of Bunbury, a major bulk-handling port in the southwest of Western Australia.

The lithium giant has operations across North and South America, the Middle East, Europe and Asia.

Of course, no one knows what Ms Rinehart’s plans are, but it is possible to think of at least three possible strategies

Full ownership, a deal with Albemarle, or with someone else?

It may be that Ms Rinehart has plans to go it alone, and build her own lithium empire.

That requires a great deal of heavy lifting.

Or she might be after holding the key to Kathleen Valley and partnering up with Albemarle.

Its area of expertise is downstream lithium processing, something with which Ms Rinehart might wish to become involved.

After all, her Hancock Prospecting has not been averse in the past to doing joint ventures on projects.

Or will Mineral Resources (ASX: MIN) come into the picture?

Recently that company’s Chris Ellison announced that MinRes had abandoned plans to build a downstream processing plant in China, clearly not wanting to become beholden to Beijing’s control.

Mr Ellison said he would prefer to develop processing in Australia even though it was more costly.

Mr Ellison and Ms Rinehart in partnership, building an Australian lithium empire?

Presumably, all will be revealed.

But what is increasingly certain is that the lithium sector will be dominated by very large players — a sector more like iron and much less like gold.