Albemarle aftermath: What a dropped takeover means for Liontown shares

What does the path forward for Liontown look like without Albermarle in the picture?

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A male lion with a large mane sits atop a rocky mountain outcrop surveying the view, representing the outlook for the Liontown share price in FY23

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The past two weeks have been a diabolical time for the Liontown Resources Ltd (ASX: LTR) share price.

Shares in Liontown have tumbled more than 30% following the withdrawal of a takeover bid from North Carolina-based Albemarle Corporation (NYSE: ALB) — one of the largest lithium producers globally. It is believed, though not explicitly confirmed, that the $3 per share offer fell through due to Gina Rinehart's 19.9% stake creating "complexities" to the transaction, as Albermarle put it.

One week on from sharing a parting glass with Albermarle, where does Liontown Resources stand?

How is the lithium company positioned now?

The Kathleen Valley Lithium project was assigned $951 million in project capital costs in September in order to reach production. Prior to October, all major contracts for construction and mining had already been awarded, making funding a priority.

However, without Albermarle's coffers, Liontown needed to come up with the cash elsewhere. Both debt and equity markets were tapped to get the funds needed to bring Kathleen Valley to life. The funding is comprised of $760 million in debt and up to $421 million in equity.

The combination of the two exceeds the aforementioned $951 million in capital costs. As Liontown chair Tim Goyder phrased it in the video above, "We are now fully funded with a rock-solid balance sheet to complete construction and move into production and beyond."

Unfortunately, the capital raising means the total number of Liontown shares will increase by approximately 10%. In turn, any shareholders who aren't able to participate fully will be diluted.

It is believed Gina Rinehart, Western Australia's mining magnate, participated in the raise. If true, it would mean the Hancock Prospecting executive chair would retain a 19.9% stake in the lithium upcomer.

As of 19 October, Liontown was said to be on track to start producing the critical material by mid-2024.

Looking ahead for the Liontown Resources share price

What the Liontown Resources share price will look like a year from now will be predicated on a range of factors. Assuming the Goyder-guided company reaches production next year, the price of lithium will arguably hold the most influence over the miner's value.

Currently, analysts are divided over the prospects for the Liontown share price.

Both Barrenjoey and JP Morgan have cut their ratings to underweight and assigned price targets of $1.60 and $1.30, respectively. In contrast, the team at Macquarie raised their rating to outperform with a $2.70 target on Liontown shares.

Macquarie's price target would suggest a potential 49% upside to the current Liontown share price of $1.82.

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JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Mitchell Lawler has positions in Albemarle and Macquarie Group. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended JPMorgan Chase and Macquarie Group. The Motley Fool Australia has positions in and has recommended Macquarie Group. 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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