LTR (ASX) Ann: Annual Report to shareholders

Originally posted by sabine: ↑

https://thewest.com.au/business/min...-paid-to-swap-out-its-debt-funding-c-16216882

Annual report reveals the hefty price Liontown Resources paid to swap out its debt funding

Adrian RausoThe West Australian
Sun, 29 September 2024 11:00AM

Pictured are the board members of Liontown Resources at the company’s annual general meeting, Pictured right is CEO Tony Ottaviano. Credit: Ian Munro/The West Australian

Australia’s newest lithium producer forked out $21.3 million to replace syndicated loans with a significantly smaller funding deal to get its Kathleen Valley mine in the Goldfields up and running.

Liontown Resources’ annual report lodged late on Friday revealed the financial sacrifice made to bin two debt packages in the space of six months.
A $550m loan, which was via a syndicate of commercial and Australian government lenders, was cobbled together in March — less than two months after a similar $760m debt agreement had been torn up by the lenders due to global analytics firm Wood Mackenzie forecasting a grim lithium price environment over the next few years.
The $760m loan being yanked away from Liontown forced the size of Kathleen Valley to be scaled back.

Liontown then switched the $550m debt facility in early July to $US250m ($379m) of convertible notes with Korean battery manufacturer LG Energy Solution.
This was on top of an existing $300m loan owed to US car maker Ford.
“All costs related to the cancelled debt facilities have been expensed during the year,” Liontown stated in its annual report.
“The costs relating to these activities totalled approximately $21.3 million and covered commitment fees, advisory fees, legal fees and the accelerated amortisation of capitalised borrowing costs relating to the Ford debt facility.”

Convertible notes are essentially a low-interest type of debt that can be converted into shares.
The deal with LG included a 10-year offtake extension for Kathleen Valley’s output and a “collaboration agreement” to “explore” the feasibility of establishing a lithium refinery.

Liontown’s annual report also shows the company had $331.5m of cash by the end of August, and $317.9m of borrowings and $143m of lease liabilities by June 30.
The LG pact was announced two days after June 30, meanwhile the lease liabilities are understood to be predominately related to Kathleen Valley’s off-grid hybrid power station — built and owned by Zenith Energy.

The price tag to build the entire Kathleen Valley project, which cranked out first spodumene concentrate on the final day of July, was last updated just over a year ago.
It increased from $895m to $951m, but the company’s largest shareholder — Gina Rinehart’s Hancock Prospecting — believed the ultimate cost could exceed $1 billion.
The Rinehart investment vehicle made that statement as it crept up the Liontown register to eventually thwart a $3 per share bid from Albemarle in October.
“(Liontown) also incurred approximately $4 million in costs relating to the Albemarle offer which primarily relates to advisor fees,” the annual report reads.

Since Albemarle walked away from a takeover Liontown has been battered by tumbling lithium prices — its shares last changed hands at 78¢.
Kathleen Valley is currently in the ramp up phase with production expected to reach full tilt next quarter.

The current spodumene concentrate price is about $US790 per tonne and Citi estimates Kathleen Valley will only make money if the price is above $US900/t.
Liontown boss Tony Ottaviano in August — when the price was about $US870/t — said the WA Government should lend a helping hand to the State’s struggling lithium miners by providing royalty relief.
“If we’re hovering around the 870 (US dollar per tonne) mark, then maybe the Government should respond sooner rather than later, we don’t want to leave it to the last minute like they did with nickel . . . we saw what happened.”

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I'm not an expert on finance, but does anyone doubt that the "hefty" price paid by LTR is substantially cheaper than the cost associated to the $550 millions loan?

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(20min delay)
Last 82.5¢		Change -0.025(2.94%)		Mkt cap ! $2.000B

Open	High	Low	Value	Volume
85.0¢	85.5¢	82.5¢	$9.640M	11.59M

Ann: Annual Report to shareholders, page-40

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