PERTH (miningweekly.com) – Gina Rinehart’s Hancock Prospecting has increased its stake in lithium developer Liontown Resources and has raised concerns around the company’s increased cost expectations at the Kathleen Valley project, as well as plans to shelve the direct shipping ore (DSO) plans at the mine.
Hancock at the end of last week announced that it had increased its shareholding in Liontown to 12.4%, nearing the 15% shareholding mark that would allow the company to block the takeover offer from critical minerals major Albemarle.
Albemarle is in the midst of a due diligence on Liontown after announcing a A$6.6-billion bid for Liontown, tentatively offering A$3 a share for the ordinary outstanding shares in the company.
Hancock said in a statement that its acquisition of additional shares in Liontown had been made at a price of no more than A$3 a share.
Hancock has also expressed its concerns around Liontown’s ability to bring the Kathleen Valley project to fruition, after Liontown last week warned that capital costs for the project were now estimated at A$951-million, up from the previous estimate of A$895-million.
The capital cost estimate excluded A$26-million for early mine development and the acceleration to a four-million-tonne-a-year production rate expansion, as well as A$37-million associated with the construction of the 567 000 t pre-first production run-of-mine stockpiles from the mining operations, which will be included in the operating costs once spodumene sales start.
The company also announced that it would shelve DSO plans at Kathleen Valley on the back of the softening lithium prices.
Hancock said in a statement that the latest capital cost increase for the Kathleen Valley project ignored inflation, which could result in the actual capital cost of the mine exceeding A$1-billion.
“The latest capital cost estimate includes rates and quantities for awarded contracts. However, Hancock notes that the productivity, design and schedule risks largely remain with Liontown. Hancock also considers that most cost pressures typically emerge in the second half of the construction of mining projects.
“Liontown’s revised operating cost estimate has increased by approximately 50% from previous estimates. The actual numbers are some time away from being known,” Hancock said in a statement.
The company also noted that Liontown’s need to debt fund part of its capital cost, and the DSO revenue source that was now on hold, had now increased to a minimum of A$450-million, which could likely be increased.
“Ultimately, it is the Liontown shareholders that will have to meet the cost of this additional funding,” Hancock warned.