Rinehart's next move: Why Liontown shares could be on the menu

Is Rinehart charging up a takeover bid?

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The Liontown Resources Ltd (ASX: LTR) share price has sunk like a stone in the last few months, dropping over 60% in four months. Is Gina Rinehart about to ride to the rescue of the ASX lithium share?

Readers may remember that a few months ago, Liontown was the target of a takeover bid by a global lithium giant. But, Rinehart's entity called Hancock Prospecting decided to come in and buy a fifth of the business. Thus, Albemarle Corp (NYSE: ALB) decided to walk away.

Now it's being speculated that Rinehart may want to buy the whole of Liontown Resources.

Takeover talk intensifies

According to reporting by The Australian, some investors think a takeover is more likely by the mining billionaire. Interestingly, the Liontown share price rose by 14% last week, though it gave up some of those gains today.

Rinehart's entity bought those shares a few months ago at a share price of approximately $3.

The newspaper reported that under the Corporations Act's minimum bid provisions, 11 February 2024 was the end of the period that Hancock Prospecting was forced to wait to buy Liontown for less than the price paid for that 19.9% stake.

The Australian then said that market speculation about a possible takeover move "has intensified in recent days."

What's happening with the lithium price?

As an ASX mining share, the commodity price plays a big part in how much investors are willing to pay for Liontown shares because it influences how much profit it could make in the future.

Increasing supply and stuttering demand growth (particularly from China) have seen the lithium price fall substantially over the past 15 months.

Forecasts for the lithium price suggest it's not going to improve much for years. However, forecasts can change – investors may have been too optimistic in 2022 and may have become too pessimistic in 2024, or they could be right. Time will tell.

Liontown is assessing what it's going to spend its money on so that it can preserve capital and reduce the near-term funding requirements of the project. There's no change to the 3 million tonnes per annum plant capacity design that the company is currently constructing. The fall in the lithium price has led to the ASX lithium share needing to change to a smaller debt facility.

Liontown share price snapshot

Over the past year, the Liontown share price is down by 31%.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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