....LTR has a huge following that AFR is so quick to write on it when it releases its update.
Liontown slows lithium mine expansion in battle to survive Peter KerResources reporter
Nov 11, 2024 – 12.25pm
Australia’s newest lithium exporter, Liontown Resources, has slowed its mine expansion plans in an attempt to save $100 million and survive the lithium price downturn.
The austerity campaign comes as analysts fear the heavily indebted Liontown could burn through its $263.1 million cash reserves by late next year, and as managing director Tony Ottaviano warned unit costs could rise in the year to June 2026.
Liontown’s Kathleen Valley mine in Western Australia has started producing lithium-rich spodumene concentrate at the nadir of a global lithium price slump, which has already forced the closure of several Australian lithium mines and processing hubs.
The bear market for lithium means Liontown has been burning cash since it began production in July. This is a far cry from last year’s lithium boom when the company was the at centre of a $6.6 billion takeover bid from US company Albemarle and billionaire businesswoman Gina Rinehart.
Mr Ottaviano announced on Monday that he would defer a plan to expand Kathleen Valley’s extraction rate to 4 million tonnes per year; a plan that was adopted in early last year around the same time as Albemarle’s takeover bid.
The mine will instead extract 2.8 million tonnes of rock per year between now and the end of the decade.
The smaller mine will allow Liontown to defer close to $100 million of expansion spending but comes with a trade-off as lower volumes typically mean higher unit costs.
Mr Ottaviano said he would try to mitigate the trade-offs from the smaller volumes by targeting higher-grade rock sections. He said Kathleen Valley’s all-in-sustaining unit costs would be between $1170 and $1290 a tonne in the six months to June 2025.
Mr Ottaviano said those production costs would be “competitive”. Spodumene concentrate was fetching $US765 ($1162) a tonne on November 8, according to S&P Global Platts.
Jarden analyst Jon Bishop said on October 31 that he believed spodumene prices would need to reach $US900 a tonne for Kathleen Valley to break even.
He said the price would need to reach $US1100 a tonne for Liontown to service its debts to US car marker Ford and Korean battery maker LG.
Liontown’s net debt was $405 million on September 30.
Mr Ottaviano said unit costs could be higher in the year to June 2026 because of one-off factors caused by Liontown’s need to transition from the open pit at Kathleen Valley to the underground mine.
But he expressed confidence the company could survive the lithium price rout. “We have done modelling at various price scenarios, we’re good,” he said.
Mr Ottaviano said the decision to run a smaller mine at Kathleen Valley could be reversed if lithium prices rose.
Liontown shares were fetching 84¢ on Monday morning; well below the $3 per share that Mrs Rinehart was paying for a strategic 19 per cent stake in the company in September and October last year.
The company’s funding challenge has made it a target for short sellers who bet on share prices falling. More than 10 per cent of Liontown shares were sold short on November 4, as investors bet the company may have to conduct a share issuance to raise funds, which could dilute the share price.
A key metric for new lithium mines is the rate at which the processing plant can successfully extract lithium from the processed rock.
Liontown promised in its 2021 feasibility study that lithium “recoveries” from the processing plant at Kathleen Valley would be 78 per cent over the life of mine. But recoveries were 52 per cent at the end of October.
The company said recoveries had improved in recent weeks, and it was always expected they would take time to ramp up at a new processing plant.
Based on the experience of other Australian lithium mines over the past decade, Liontown said it was confident it could gradually increase recoveries in the years ahead.
