Albemarle (NYSE: ALB), the world’s leading lithium producer, unveiled a comprehensive cost-cutting strategy on Wednesday, which includes job reductions, project delays, and the sale of its stake in Liontown Resources. This move comes in response to the downturn in lithium prices.
Albemarle intends to allocate between $1.6 billion and $1.8 billion for its 2024 expenditures, a decrease from the approximately $2.1 billion invested in the previous year. These measures are part of the company’s effort to adapt to the changing dynamics of its key markets.
“The actions we are taking allow us to advance near-term growth and preserve future opportunities as we navigate the dynamics of our key end-markets,” stated Albemarle’s CEO, Kent Masters. He added, “The long-term fundamentals for our business are strong, and we remain committed to operating in a safe and sustainable manner.”
The US-based lithium producer is set to complete the commissioning of several lithium refineries in China and Australia, both of which are in advanced stages of construction. Additionally, Albemarle aims to secure the necessary permits to reopen its Kings Mountain lithium mine in North Carolina. This mine boasts one of the few known hard rock lithium deposits in the United States and could support the production of approximately 1.2 million electric vehicles per year initially.
Albemarle anticipates annual savings of $95 million from these measures, with $50 million expected to be realized in the current year. However, the company has not disclosed the exact number of layoffs resulting from these cost-cutting actions.
The oversupply of lithium in the past year has outpaced demand, leading to a significant drop in lithium prices. Most lithium price indexes, including those tracked by Fastmarkets and Benchmark Mineral Intelligence, have plummeted by more than 80% in the past year.
Experts predict that the decline in prices for lithium, a crucial component for manufacturing batteries used in electric vehicles and high-tech devices, will continue.
On Wednesday, lithium carbonate prices on the Shanghai Metals Market fell by 1.05%, closing at 103,800 yuan per tonne or about $14,556 per tonne. This represents an almost 11% price drop in just one month.
Albemarle is also looking to divest its stake in Australia’s Liontown Resources (ASX: LTR) after billionaire Gina Rinehart’s company, Hancock Prospecting, blocked a takeover bid worth A$6.6 billion ($4.3 billion) in October.
Albemarle has priced its approximately 96 million shares in the Australian lithium developer at around A$121 million in a block trade managed by JPMorgan, according to a term sheet disclosed on Wednesday.
The offer price for Liontown’s shares ranges from A$1.26 to A$1.32 per share, representing a discount of 7.4% to 2.9% compared to Liontown’s last traded price of A$1.36 on Wednesday. Liontown’s shares had traded as high as A$3 in the days preceding Albemarle’s withdrawal of the takeover bid.
Liontown, based in Perth, owns one of Australia’s most promising early-stage lithium projects, Kathleen Valley, located in Western Australia’s premier mining district, 680 km northeast of Perth.
Kathleen Valley is known for its vast and high-grade hard rock lithium deposits, with a mineral resource estimated at 156 million tonnes at 1.4% lithium oxide and 130ppm tantalum oxide. The project is on track to commence commercial production in mid-2024, with an initial production capacity of around 500,000 tonnes of spodumene concentrate, expanding to 700,000 tonnes annually within six years.
Liontown has already secured supply agreements with major players in the electric vehicle industry, including Tesla, Ford Motor, and LG Energy Solution, a South Korean-based company.
Hancock Prospecting now holds a 19.9% stake in the lithium junior, making it the company’s largest shareholder. While Rinehart owns shares in other lithium producers, her primary focus remains on iron ore investments.
