The Liontown Resources Ltd (ASX: LTR) share price closed relatively flat on Wednesday, despite being labelled with an underwhelming price target from one broker. Some investors might have focused more on suggestions that Liontown could be catching a mining giant's attention.
Shares in the lithium company finished slightly lower at the end of Wednesday's trading session. The Liontown share price closed at $2.68, down 1.11% from yesterday's closing price. For context, the S&P/ASX 200 Index (ASX: XJO) finished firmly in the red, falling 1.5%.
The resiliency in Liontown's shares was a rarity among ASX lithium shares on Wednesday. Most companies in the sector suffered steep falls amid further weakness in lithium prices. So, what could have set the Liontown share price apart from the crowd?
Close enough to take an interest
It has been abundantly clear in the past that BHP Group Ltd (ASX: BHP) is not interested in getting involved with lithium production.
As my colleague Bernd Struben reported in July, the diversified miner doesn't believe it can generate as attractive margins from lithium as it can with its current portfolio of commodities, such as iron ore.
Yet, some market spectators are implying Australia's largest listed company might be drawn to Liontown Resources — a soon-to-be lithium producer. Given the previous statement regarding BHP's lack of interest, it's hard to see what the supposed attraction would stem from.
One line of thinking centres around the proximity of Kathleen Valley (Liontown's lithium project) to BHP's Mount Keith nickel mine.
The two sites are a short 25-minute trip along Goldfields Highway from each other. Furthermore, tenements held by BHP are said to border the Kathleen Valley lithium project. This might open the possibility of BHP partnering with Liontown to get ahold of more land for expanding its nickel mine.
Indeed, the mining and metals giant is no stranger to doing deals with its neighbours. In May this year, the miner acquired nearby South Australian copper company Oz Minerals for a handsome $6.4 billion.
However, it's difficult to see BHP acquiring Liontown Resources outright. Liontown is a company with a market capitalisation of $5.9 billion with its value is tied to one of Australia's largest hard rock lithium deposits.
What else is moving Liontown shares?
The above-average trading volume in Liontown shares on Wednesday could have also been due to a broker note from Goldman Sachs.
According to the note, Liontown is trading at a premium to its net asset value of 1.7 times versus the peer average of 1.2 times. While Goldman maintained its neutral rating on the lithium company, it cut back its price target to $1.40 — suggesting a possible downside to Liontown shares of approximately 49%.
Despite this bleak projection, the company's shares are still 118% above where they were at the end of 2022.
