UBS research initiated a new BUY recommendation for those...

UBS research initiated a new BUY recommendation for those investing in LTR via their Member Direct super option this morning...

Liontown Resources "Going underground" (Buy) Shaw

First new underground spodumene mine; prospective but higherrisk

We initiate coverage on Liontown Resources (LTR) with a BUYrating and A$1.85/sh price target. LTR's 100%-owned Kathleen Valley is a highgrade and large resource. The challenge lies in delivering its ambitious peakproduction of ~700ktpa of SC6.0 spodumene and 86ktpa of lithium hydroxide(LiOH). We are wary of cost, timeline and delivery risks given this is thefirst new underground lithium mine and potential fully integrated downstreamoperation outside of China. We flex opex and capex higher, adopt conservativetiming assumptions and risk-weight the LiOH downstream at 20%. We estimateLTR faces a ~A$250m funding gap from 2H-FY24 that we are confident can bebridged. Options include direct shipping ore (DSO), pre-payments, furtherspodumene offtake, OEM participation (e.g. GM US$650m funding for LAC),government assistance, and project/corporate debt.

Our NPV rises to A$3.05/sh in our upside case of fully de-riskeddownstream and 6mth earlier production with another 40cps under +10% prices.LTR is higher risk for reward, but we see risks priced in.