Bell PotterA$550m syndicated facility; Kathleen Valley on...

Bell Potter

A$550m syndicated facility; Kathleen Valley on schedule

LTR has announced it has executed a A$550m senior secured syndicated debt facility,

funding Kathleen Valley (KV) to first production and ramp-up to its 3Mtpa throughput

base case. Interest will be capitalised and the facility matures with a bullet payment on

31 October 2025 (more than 12 months after first production). The facility will refinance

LTR’s existing A$300m debt facility with Ford. LTR have noted that the facility retains

the flexibility for longer term solution to be entered or refinancing prior to maturity. The

syndicate includes CBA, NAB, SocGen, EFA and the CEFC. KV is on schedule and

budget to commence first production in the middle of this calendar year. The new

facility follows a previous syndicate’s withdrawal of support for a A$760m debt facility

announced in January 2024 following material lithium price outlook downgrades.

Funding headroom plus longer-term confidence

We estimate the new facility provides funding headroom of around A$150m above

KV’s remaining capex and working capital requirements. Notably, the debt conditions

and covenants provide some confidence in KV’s status, requiring that the project can

support the facility and a subsequent refinancing under independent technical

assessments and price forecasts. We estimate that at 31 December 2023, LTR had

around A$615m left to spend at KV (including working capital); the new debt facility

provides cash liquidity of circa A$767m.

Investment view – Speculative Buy, Valuation $1.90/sh

With the near-term funding overhang reduced, we have lifted our LTR valuation to

$1.90/sh (previously $1.60/sh). LTR’s 100% owned KV lithium project remains highly

strategic in terms of its stage of development, long mine life and location. LTR has

offtake contracts with top tier EV and battery OEMs (Ford, LG Energy Solution and

Tesla). Hancock Prospecting has a 19.9% interest in LTR.

LTR is an asset development company; our Speculative risk rating recognises this

higher level of risk.