Speaking of analysts, whadda they reckon of Liontown? Jarden’s...

Speaking of analysts, whadda they reckon of Liontown?

Jarden’s Jon Bishop, Ben Lyons and Adam Bennett — in a note coyly titled “Men at work: till the money runs out” — say Liontown’s updated $550 million debt package for the Kathleen Valley lithium mine may not be enough to see it through to its bullet repayment on October 31 next year.
A new financial model is also expected to be delivered in July this year as part of the deal, leaving numbers from a 2021 DFS up in the air.

But they think it will fund the company long enough for it to refinance with a longer term package.
“Even after accepting 31-Dec-23 cash of $515m is sufficient to achieve first SC production from mid-2024, unless the operation commissions ahead of any of the peers to date AND lithium prices are well above US$2,000/dmt SC6, our modelling does not generate sufficient FCF to meet the bullet repayment due 31-Oct-25,” the Jarden analysts wrote.

“We recognise that should either of these scenarios play out, LTR would be in a better position to refinance the facilities with (at least) longer term debt but the ability to refinance remains a key medium-term risk. Assuming the operation continues with development of KV underground to deliver 3mtpa from CY25, we currently model that the $550m facility requires an additional 2.5yrs (assuming steady state achieved by JHFY26) to retire the facility on our price deck.”

Jarden have a 91c price target and now underweight rating on LTR thanks to the sudden boost yesterday’s debt announcement gave to the developer. It’s down 5.73% today to $1.32.

Goldman are more bullish, saying an additional $50-100m of external capital would only be needed if spodumene prices were to fall to US$600/t. They’re currently ~US$975/t.

“We forecast Kathleen Valley turning FCF (free cash flow) positive from mid-CY25 on our spodumene price forecast, which we expect to support any refinancing of the debt if not already agreed prior, where LTR is continuing to explore options for a longer-term funding solution in parallel,” they said.

“LTR does not currently anticipate needing to drawdown on the facility until early in 3Q CY24, and note that Kathleen Valley remains on schedule and budget to commence first production in the middle of CY24 (GSe Sep-24).”

Hugo Nicolaci, Paul Young and Elise Bailey say an expansion from 3Mtpa to 4Mtpa, deferred after a $760m debt package fell over earlier this year, would cost around $100m from FY28, making it a ‘compelling brownfield expansion’ on Goldman’s benchmarks.

“Our 12m PT is unchanged at A$1.45/sh on our LT spodumene price of US$1,150/t, where LTR is trading at a modest premium to our revised NAV at ~1.05x (having traded down to ~0.7x), and an implied LT spodumene price of ~US$1,175/t (peer average ~1.25x & ~US$1,350/t),” they said.

“We remain Neutral rated, where we note that historically mining stocks tend to underperform through the execution and ramp up phase of a project.”