Sayona Mining Ltd (SYAXF)

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Liontown bid forces $174m short squeeze as shares soar


A horror run for lithium prices is close to a bottom as Chinese battery makers move to restock supplies in the second quarter and the fundamental narrative of growing demand for electric vehicles supports prices, says Citi resources analyst Kate McCutcheon.

On Tuesday, the battery metals sector surged after Perth-based explorer Liontown Resources rejected a $2.50 a share takeover bid from US commodities giant Albemarle on the basis that it undervalued Liontown's Kathleen Valley Project and coincided with lithium price softness.

"We don't think that [lithium] prices go back to the peaks, but we do expect prices to pick up from spot in the back end of this year, and moderate to $US40,000 a tonne for carbonate for next year," said Ms McCutcheon.

"But this is still a compelling incentive price and is disconnected from the cost curve. It's unlike any other commodity, except for iron ore."

Liontown shares surged 54.1 per cent to $2.35 on Tuesday, with larger producers Pilbara Minerals and Mineral Resources jumping 10.2 per cent and 5.9 per cent respectively. Among junior explorers and producers, Core Lithium rocketed 16.7 per cent, Sayona Mining surged 13.5 per cent and Canada-based Patriot Battery Metals added 10 per cent.