LA Private

Liontown secures extra funding for Kathleen Valley

Liontown Resources (ASX:LTR) has secured extra funding to help it meet cost overruns on its “Kathleen Valley” mine in WA. The company revealed that it had obtained extra funding support of up to $300 million for the mine’s delivery.

The money will come from a group of government finance agencies in Australia and South Korea and will allow Liontown to complete the $895 million “Kathleen Valley” project.

That figure is up sharply from the $545 million estimate in June 2022, which was $72 million above an earlier estimate of $473 million.

A December 2019 estimate put the cost at $240.5 million, so the cost has almost quadrupled in that time due to higher material costs, Covid, labour shortages, and higher costs.

Liontown said the collaboration between Export Finance Australia (EFA) and equivalent Korea Trade Insurance Corporation (K-Sure) and Export-Import Bank of the United States (EXIM) “reinforces a shared commitment to diversify global battery value chains. While non-binding and conditional, the joint support from the ECAs provides Liontown with a strong foundation as it advances all funding options to conclusion.”

The company’s CEO, Tony Ottaviano, told the “Diggers and Dealers” conference in Kalgoorlie on Monday that “Kathleen Valley” “is now less than 12 months away from achieving the target of first production in mid-2024, with mining and construction progressing to schedule and materially in line with the capital expenditure estimate, with committed spend for the Project at approximately 60 percent at the end of FY23.”

“The underground mining services and the structural and mechanical piping contracts are on-track to be awarded in the September quarter as scheduled. The award of the underground contract will enable Liontown to finalize its operating cost review this quarter,” he told the first-day audience on Monday afternoon.

Liontown last week revealed that it will proceed to direct shipping of low-grade lithium ore (DSO) to generate early cash flows from the project and to gain processing experience. Between 250,000 and 300,000 tonnes of DSO could be involved. The CEO repeated last week’s comments on this proposal that “Material for DSO has been liberated through mine plan optimisation and is in addition to Ore Reserves. With on-site crushing and supply chain services secured, and customer engagement well advanced, the first DSO shipment is targeted by the end of the calendar year 2023.”

In a final major news announcement, Liontown revealed that it had done a deal with Japan’s “Sumitomo Corp” to investigate a lithium hydroxide plant in Japan. The two companies will investigate the development of a lithium supply chain between Australia and Japan. The agreement will support a jointly funded study that explores the feasibility of using Liontown’s spodumene, or a future lithium sulfate product produced in a Western Australia-based plant, to produce lithium hydroxide in Japan. The study is non-binding and is expected to take two years.

Liontown has already lined up deals to sell lithium from “Kathleen Valley” to LG Energy Solutions, Tesla, and Ford. Liontown shares were up around 0.4% just after 2 pm at $2.75.

Meanwhile, in another development in the sector, “Lithium Australia” shares jumped sharply on Monday after it revealed that it had signed a deal with “Mineral Resources” to form a joint venture and develop a pilot plant that would produce lithium iron phosphate to be used in electric vehicle batteries. “MinRes” will fund the development and operation of the pilot plant in Queensland with a total budgeted cost of $4.5 million and provide raw materials at no cost to the company, “Lithium Australia” said.

The deal includes “Lithium Australia” contributing its patented “LieNA” technology, which can improve lithium extraction yields by up to 50%, and managing the pilot plant’s production process. “Lithium Australia” says its extraction technology “is underpinned by recovering lithium from fine and low-grade spodumene, which is usually disposed of as waste streams, improving mining efficiency, sustainability, and potential profitability.”

Depending on the results of the pilot plant, both parties will form a 50:50 joint venture to own and commercialise the “LieNA” technology. “Lithium Australia” shares leaped nearly 70% by just after 2 pm Monday after the news was released.