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Liontown Resources (ASX:), the Australian mining company, experienced a significant 32% drop in share value following Albemarle (NYSE:)’s decision to abandon a proposed US$4.16 billion takeover. The announcement last week led to a standstill in Liontown’s stock trading, with shares closing at A$2.79.
According to InvestingPro, Liontown Resources has a market cap of 433.6M USD and a P/E ratio of 9.07. The company’s revenue for LTM2023.Q4 was 300.2M USD, however, it showed a negative growth rate of -0.91%. Furthermore, the company’s gross profit for the same period stood at 283.46M USD, indicating a high gross profit margin of 94.42%.
The company recently raised A$365 million (US$231 million) in equity for its Kathleen Valley lithium project. The market reacted negatively to Albemarle’s exit and wider market conditions, including a steep decline in lithium prices due to surplus supply. Tony Ottaviano, CEO of Liontown Resources, attributed the share pricing to these factors.
InvestingPro Tips suggests that although Liontown has been quickly burning through cash, it holds more cash than debt on its balance sheet. In addition, the company’s liquid assets exceed its short-term obligations. This could be a positive sign for potential investors. For more insights like these, one can check out the InvestingPro platform which offers additional tips.
Ottaviano also announced that Liontown had arranged A$760 million in debt as part of its “Plan A” funding package. Some of these funds have been allocated for existing loan refinancing. He noted that an acquisition premium previously included in Liontown’s stock is now moderating and stated, “The share price will be what it will be”.
Despite the turbulent times, Australia’s wealthiest person, Gina Rinehart, has shown confidence in Liontown. Through Hancock Prospecting, Rinehart secured a 19.9% stake in the company with intentions to significantly influence its future.
In regards to the recent equity raising for the Kathleen Valley lithium project, Ottaviano described the outcome as “fantastic”. He confirmed that Liontown will issue about 203 million new ordinary shares as part of this process.
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