Tony OttavianoIt’s showtime for Tony Ottaviano and the team at...

Tony Ottaviano

It’s showtime for Tony Ottaviano and the team at Liontown Resources as they enter what will likely be a defining year in the lithium company’s history.

Pre-revenue, Liontown became the face of the lithium boom when it knocked back a $5 billion takeover bid from US giant Albemarle in March. It was a courageous decision; lithium prices were sliding and Liontown needed more money to complete construction of its Kathleen Valley lithium mine in Western Australia. But by September, the Liontown crew were vindicated when Albemarle came back offering $6 billion.

Liontown Resources boss Tony Ottaviano in Perth. Trevor Collens

The deal was all but sealed when billionaire Gina Rinehart started building a blocking stake in Liontown and famously scared Albemarle away. Failure of the deal left Ottaviano – a gregarious alumnus of BHP’s iron ore division – to rally the Liontown troops, who could have been forgiven for mentally checking out when the company’s directors agreed to sell the company to Albemarle.

In 2024, the Liontown team will have to complete construction of the Kathleen Valley mine, which will be Australia’s first to try underground mining of hard rock lithium. They will be under pressure to hit the schedule for first production in the middle of 2024, and do so without blowing out costs again.

Those challenges are notionally controllable, but Ottaviano and his team will also have to deal with some uncontrollable challenges. First, the sliding price for the sort of lithium-rich spodumene concentrate that Liontown will sell. Brokers UBS and Goldman Sachs are talking about prices near $US800 a tonne in the next couple of years.

Kathleen Valley will make money at $US800 a tonne once the mine is fully ramped up. But it will be a mighty challenge for the mine to be profitable at that sort of price in the first couple of years when production volumes are low and new machines are being switched on for the first time. Canaccord reckons Liontown’s unit costs will be $US1252 a tonne in 2025 before falling to $US760 in 2026 when production volumes rise.

The second uncontrollable will be Rinehart, who will be free to make a cheaper takeover bid for Liontown after February 11. That date represents the end of the cooling-off period enforced by the “minimum bid price” provisions of the Corporations Act.

Between now and February 11, she can only take over Liontown if she offers at least the same price at which she was buying Liontown shares in September; about $3 per share. But after February 11, she can offer whatever she likes.

With the Liontown share price languishing below $1.30 in December, Australia’s richest person could get an opportunity to acquire Liontown at a price well below the $6 billion that Albemarle was willing to pay in September.

It all adds up to another year of high drama for Ottaviano and Liontown.