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Albemarle plans $US2.1 billion share issue amidst lithium market downturn

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2024-03-05

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Albemarle is looking to raise more than $US2.1 billion (over $A3.2 billion) in a share issue to investors as it seeks to maintain high levels of liquidity to ride out the current downturn in demand for lithium and the concurrent price slide.

The US-based company said some of the money will be spent on processing facilities now under construction in Australia (at Kemerton in the southwest of WA) and in China.

More importantly, the money raised will help staunch the explosion in short-term (less than a year) debt to more than $US625 million at the end of 2023 from just over $US2.1 million a year earlier.

The fundraising comes despite the giant having nearly $US890 million in cash on hand at the end of December, which was down sharply from the $US1.499 billion at the end of 2022.

Albemarle said it had started an offering of $US1.75 billion of depository shares (each representing a 1/20th interest in a share of Series A Mandatory Convertible Preferred Stock of the Company ("Preferred Stock”), as well as making available a 30-day option for the underwriters to buy a further $US262.5 billion depository shares.

A total of $US2.137 billion is being sought by Albemarle, which it says it intends "to use the net proceeds from the Offering for general corporate purposes, which may include, among other uses, funding growth capital expenditures, such as the construction and expansion of lithium operations in Australia and China that are significantly progressed or near completion, and repaying the Company's outstanding commercial paper.”

Buried in the company’s December 31 balance sheet was a massive surge in short-term debt (the commercial paper) which the fundraising will seek to reduce.

The accounts show that Albemarle had what it termed "Current portion of long-term debt of $US625,761 million" at December 31, up from just $US2.18 million at the end of December 2022.

Long-term debt rose to just over $3.54 billion at the end of 2023 from $US3.21 billion a year earlier.

It is obvious from the rundown in cash on hand and the ballooning short-term debt that without a major capital raising, Albemarle couldn’t afford to continue financing its extensive capex program in Australia, China, and elsewhere.

In its January revamp announcement, the company said it planned to cut capex spending by up to half a billion dollars to a range of $US1.6 billion to $US1.8 billion from the previous forecast of $US2.1 billion.

Albemarle shares fell more than 6% during trading on Wall Street on Monday and dropped more than 7% in after-hours dealing when the share issue became known.

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