Ann: Kathleen Valley Project Update, page-73

Hancock on Friday used a project update by Liontown — revealing a 6 per cent lift in capital costs to $951m — to validate its previous warnings that Kathleen Valley faces “significant execution, operational ramp-up and market risks”.

It comes as an ASX disclosure showed Hancock had lifted its stake in the Tim Goyder-chaired company to 12.36 per cent — up from 10.69 per cent — after spending over $110 million to snap up another 36.8 million shares since Tuesday.

The miner also accused Liontown of underplaying the cost blowout, saying it had been reported on a “real” basis “which ignores inflation”.

Liontown said it had advised US suitor Albemarle, which is about halfway through conducting four weeks of due diligence following a takeover bid priced at $3-a-share.

“Factoring in inflation over time, the actual capital cost could be in excess of $1 billion. This follows Liontown’s prior cost increases, above the $473m estimate from its definitive feasibility study,” Hancock said in a blunt statement.

“The latest capital cost estimate includes rates and quantities for awarded contracts. However, Hancock notes that the productivity, design, quantity and schedule risks largely remain with Liontown. Hancock also considers that most cost pressures typically emerge in the second half of the construction of mining projects.”

Hancock noted that while Liontown’s revised operating cost estimate had increased by about 50 per cent from previous estimates “the actual numbers are some time away from being known”.

It also took aim at Liontown’s decision to put direct shipping ore from Kathleen Valley, near Leinster, on hold indefinitely.

Liontown in August announced it would get the cash flowing early from the project after green-lighting plans to ship DSO ahead of first concentrate that is not due until next year.