Liontown Resources is currently evaluating its expansion strategy for the Kathleen Valley Lithium Project in light of the recent decline in lithium prices. The company remains committed to its initial timeline for the first production from the Kathleen Valley project, expected in the middle of this calendar year.
However, the sharp drop in spodumene prices has prompted Liontown to conduct a thorough review, aiming to conserve capital and address near-term funding requirements.
The project review encompasses a reassessment of the planned 4 million tonne per annum underground development, potential adjustments to the mine plan sequencing, and exploration of additional cost optimization measures.
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Despite these considerations, the company affirms that there will be no alteration to the 3 million tonne per annum plant capacity currently under construction. Liontown’s cash reserves, standing at approximately $515 million as of December 31, 2023, are expected to cover construction activities leading up to the projected mid-2024 production commencement.
Liontown had previously secured a commitment letter and credit-approved term sheet for a A$760 million debt funding package in October 2023. However, recent declines in spodumene prices have necessitated discussions for a revised, smaller debt facility, impacting the previously announced commitment letter. Lenders within the syndicate have expressed continued support for the project, despite the adjustments.
The company anticipates providing a funding update by the end of the March 2024 quarter and remains optimistic about the long-term prospects of the lithium market.
In a broader context, the challenges faced by Liontown resonate with the current state of the global lithium market. Lithium carbonate prices, stabilizing below CNY 97,500 per tonne in January, reflect an over three-year low. The market has found an equilibrium with ample supply and muted demand, influenced by a slowdown in electric vehicle sales in China and plateauing sales in the US. Forecasts now suggest a lithium deficit might not return until 2028, a stark contrast to earlier expectations.
Albemarle, the world’s top lithium producer, has also announced cost-cutting measures, including job cuts and deferred spending on projects, in response to falling lithium prices. The company plans to invest $1.6 billion to $1.8 billion in 2024, down from approximately $2.1 billion in the previous year. These measures are expected to save $95 million annually, with a focus on advancing growth and preserving future opportunities.
Additionally, Albemarle is seeking to sell its stake in Australia’s Liontown Resources, following the withdrawal of a takeover bid by Hancock Prospecting. The offer price of A$1.26 to A$1.32 per share represents a discount to Liontown’s last traded price, and the company’s largest shareholder is now Hancock Prospecting with a 19.9% stake.
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