Mixed blessings for Liontown's $450m capital raise

Liontown Resources (LTR) has successfully completed a sizable $450m raise to fund its ‘world-class’ Kathleen Valley project in Western Australia. The lithium exploration and development company’s stock plunged -14% as the market opened.

Post-raise, Liontown will have $474m in cash reserves. It said that the funds will be used towards Kathleen Valley development costs including the ordering of critical long-lead items and construction capital expenditure.

Liontown’s Managing Director and CEO, Tom Ottaviano said that the cash injection ensures that the company is “well capitalised with certainty of funding for the Stage 1 capital cost of the initial 2.5 Mtpa development of Kathleen Valley.”

Liontown is expected to make a final investment decision for Kathleen Valley in the second quarter of 2022. If all goes to plan, early works are expected to kick off late 2022 and construction to be complete by late 2023.

Inflation makes its mark on development costs

Last month, Liontown released its Definitive Feasibility Study (DFS) which brought to our attention a “globally significant tier 1 project” with “exceptional economics”.

The DFS flagged that inflationary pressures had pushed up initial capital costs by an extra $79m.

Despite the higher costs to kick start the project, Liontown said that the lithium market is forecast to enter a deficit in 2024, just as Kathleen Valley makes its maiden production. It expects the project to supply roughly 5% of global spodumene in 2024, growing to around 6% by 2029.

To add the cherry on top, Liontown is targeting net zero emissions by 2034, playing into the growing popularity and relevance of Environmental, Social, and Governance (ESG) investing.

Outsized gains for emerging lithium giant

Liontown shares have run up an extraordinary 294% year-to-date, trailing just above household names like Pilbara Minerals (PLS) and Orocobre (ORE).

Liontown joined the S&P 300 in September, and its current $3.7bn market capitalisation makes it one of the top 200 largest companies on the ASX.

Looking ahead, Liontown said that it has held discussions with “in excess of 50 parties who have expressed interest in offtake”.