Liontown has built a world class mine at Kathleen Valley during a brutal 2 year lithium bear market that started in late 2021 for some lithium developers. Started in April 2022 for other lithium developers. And started / continued for nearly all listed lithium companies after LCE spot prices peaked in mid November 2022.
Liontown is one benchmark (there are others) to compare other lithium developers to over the last 2-3 years.
I recall Tony Ottaviano grinning from ear to ear with his hands in a big hopper full of spodumene concentrate bulk sample ready to send to potential offtake partners. That was late 2021. Shortly before Christmas. It only took a month or two to secure the first binding offtake agreement. Then another one. Then a third one. All binding. LG Chem. Tesla. Ford which provided $300 million senior secured debt facility which was fully used and repaid.
I always questioned the flawed logic (to me) of an offtake partner requiring a loan repayment BEFORE first production, revenue or earnings. In my view offtake partners who provide project financing should give the company more breathing space. Otherwise the developer needs to refinance debt and can struggle as Liontown did with the indicative $760 million syndicated debt facility with banks who baulked and ran away, only to come back and offer 50% less. ECAs picked up the lions share.
Tony O also noted in late 2021 there were many miners in name only (MINO) whose only skill was to mine money from retail investor pockets. And so it turned out to be as many MINOs now risk bankruptcy given their market caps and cash balances have fallen sharply and some need over 33x their market cap in CAPEX funding for "Phase 1" of their lithium projects. One MINO has $30 million AUD in the bank. A market cap of $66M AUD ($44M USD) and needs $US1.5 billion in CAPEX. And still can't guarantee supply.
As Tony Ottaviano also said: "Tell 'em they're dreaming!"
#Lithium
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We have expanded our strategic partnership with foundation customer, LG Energy Solution, securing a US$250 million investment and a 10-year offtake extension, paving the way for long-term growth and collaboration to explore the feasibility of establishing a lithium refinery.
The long-term funding arrangement will support the ramp-up of Kathleen Valley into 3 Mtpa steady state production, while continuing optimisation studies and early underground mine development works to preserve the 4 Mtpa expansion option.
LG Energy Solution is one of the world’s largest manufacturers of lithium-ion batteries. The long-term partnership with LG Energy Solution follows an extensive due diligence process, further reinforcing the tier-one qualities of Kathleen Valley and reflecting Liontown’s position as an emerging producer of high-quality, fully IRA-compliant, lithium raw materials.
Read the full announcement: https://lnkd.in/gaEPpjKZ
#ASXNews #ASX #LTR #LGEnergySolution #Mining #Lithium #CriticalMinerals #BatterySupplyChain #LithiumIonBatteries #DownstreamProcessing
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Impressive growth!