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Top Stories This Week: David Morgan Talks Gold, Liontown Rejects Albemarle
Mar. 31, 2023 12:00PM PST
David Morgan of the Morgan Report shared his thoughts on where gold is going next; meanwhile, Liontown Resources rejected top lithium producer Albemarle's acquisition proposal.
Gold has cooled after market turmoil allowed it to break US$2,000 per ounce not once last week, but twice. Although the metal neared that level this week, it was just under US$1,970 at the time of this writing on Friday (March 31).
Prior to last week, gold had only passed US$2,000 a couple of times in the past — first in July 2020 amid global COVID-19 pressures, and next in February 2022 on the back of Russia's invasion of Ukraine.
Now market watchers understandably want to know what's next for the yellow metal, and I asked David Morgan of the Morgan Report to share his thoughts. He said if gold is able to hit a new high it could take off running.
"Once you get to the new high, we'll call it US$2,060, then the algorithms kick in," he said. "The algorithms know the momentum play is whenever you make a new high there's no upward resistance. So even a little bit of buying will drive it higher. And when you get another new high, then everyone says, 'Oh, gold's on a run. How far will it go?' And there's no selling — I'm exaggerating slightly, but there's not that much selling. And so then a little bit more buying or a lot of buying will take it even higher."
Lithium M&A in focus as Liontown shuts down Albemarle
Gold M&A has received a lot of attention lately, but this week brought a major move in lithium. Liontown Resources (ASX:LTR,OTC Pink:LINRF) said on Monday (March 27) that it has rejected an indicative proposal from Albemarle (NYSE:ALB).
According to Liontown, major producer Albemarle wanted to acquire all of the company's shares at a price of AU$2.50 each. Liontown believes this amount is a substantial undervaluation, although it does come in above Albemarle's previous two offers of AU$2.35 per share on March 3 of this year and AU$2.20 per share on October 20 of last year.
Explaining its stance, Liontown calls Albemarle's approach "opportunistic" given the recent softness in companies exposed to the lithium sector. The company also highlights ongoing activity at its flagship Kathleen Valley project in Western Australia, saying that the asset is being de-risked as mining operations start up and construction continues on schedule.
"In coming to its decision, the Liontown Board noted the opportunistic timing of Albemarle’s Indicative Proposal, coinciding with recent softness in companies exposed to the lithium sector and the pre-production status of the Kathleen Valley Project" — Liontown Resources
Albemarle's bid amounts to US$3.7 billion, and the fact that Liontown shot it down has sparked commentary on exactly how much large producers may have to pay if they want to add advanced properties to their portfolios — Kathleen Valley is set to deliver its first output in mid-2024. We'll be watching closely to see how the story develops, so stay tuned for more updates.
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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
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