Liontown Resources Ltd (ASX: LTR) shares are falling on Tuesday.
In morning trade, the lithium developer's shares are down 1.5% to $2.96.
What's going on with Liontown shares?
Investors have been selling the company's shares this morning after it was revealed that Gina Rinehart's Hancock Prospecting has increased its stake to 10.7%.
According to the release, two weeks after becoming a substantial shareholder, Rinehart has lifted her holding to approximately 235.5 million Liontown shares from 169.9 million shares.
Hancock Prospecting continues to refer to the investment as a "strategic stake" and has not advised whether it is interested in launching a competing takeover proposal.
As things stand, lithium giant Albemarle is midway through its due diligence in relation to its $3 cash per share proposal.
What did Hancock Prospecting say?
Hancock Prospecting revealed that it has been buying shares (at no more than the $3.00 per share offered by Albemarle) despite recent lithium price weakness. This is due to its long-term approach to making investments. It said:
This Strategic Stake has been acquired for no more than $3.00 per share, and at an average price per share well below that level. Whilst lithium prices have continued to fall since Hancock first became a Liontown shareholder (and with spodumene concentrate prices falling by approximately 60% over the past 9 months), Hancock maintains a long term approach to its investments and commodity markets.
The mining giant also notes that it can help Liontown execute the development of a complicated underground operation. It adds:
In line with that long term approach, Hancock can provide Liontown with the opportunity to manage its project execution and operational ramp-up risks where it is of value – and particularly in light of the inflationary market pressures that are creating challenges for project delivery across Australia.
Liontown's indicated production rate of 3mtpa (increasing to 4mtpa) at its Kathleen Valley project is significant for an underground operation and carries commensurate production and operating cost risks, with its target recovery rate (modelled at 78%) also exceeding the recoveries achieved by most existing and planned lithium producers in West Australia.
Why are its shares falling?
Hancock Prospecting's unwillingness to pay over $3 per share for its stake may be the reason for today's weakness. This appears to indicate that Rinehart isn't wanting to get into a bidding war with Albemarle that would drive Liontown's shares higher.
Instead, it could be more likely that Rinehart wants to hold onto a portion of the lithium miner if Albemarle acquires it.
