Liontown Resources Ltd [ASX:LTR] shares are experiencing a notable uptick today. While the wider market remains cautious after yesterday’s global rout, the lithium miner’s stock price has climbed nearly 2% to 89 cents per share.
This rise comes on the heels of an announcement released prior to the company’s appearance at the conference Diggers and Dealers.
At today’s conference, Liontown revealed that it had reached additional production milestones at its Kathleen Valley Lithium Project in Western Australia.
Despite today’s jump, Liontown’s shares have still been down 67% in the past 12 months, as low lithium prices and takeover dramas have dragged the price lower.
But with the first supply chain milestone passed, is this pullback a great time for investors to enter?
Source: TradingView
Key Milestones Achieved
Two significant achievements were highlighted in the company’s release today.
First, the first ore from underground operations at Mt Mann was extracted in the first week of August, marking a crucial step in the project’s development.
Second, approximately 145 tonnes of spodumene concentrate have been loaded and dispatched by truck from Kathleen Valley to the Port of Geraldton.
That marks the first production through the entire Kathleen Valley value chain.
Liontown’s management said the milestone shows the steady progress in bringing its lithium project online.
But it hasn’t always been smooth sailing for Liontown.
The failure of the $6.6 billion takeover offer from US chemicals giant Albermale left the company scrounging for lenders earlier this year to help develop the Kathleen Valley Project.
Gina Rinehart, who built a 19.9% stake in the company, was seen as the thorn in the side of the deal, spending nearly $1 billion in buying LTR stock. Despite this move, she remained quiet about loans or further funding.
Then, in July, Liontown managed to secure financing and extend its offtake deal with Korean conglomerate LG Energy to 15 years.
The $250 million convertible note issued to LG brought Lionown’s cash balance in line with development goals, bolstering its total cash balance to $501 million.
Since then, the project’s steady development has moved towards its production goals, with Liontown saying they expect 3 million tonnes per annum (Mtpa) throughput by Q1 of 2025.
Liontown also reported today that since the commencement of underground operations in November, more than 4,000m of underground mine have been developed.
Tony Ottaviano, Liontown’s Managing Director and CEO, was enthusiastic at the D&D conference about the company’s recent achievements, saying:
‘Just a week after achieving first production, the first truckload of spodumene concentrate has been successfully dispatched to Geraldton Port. This rapid progression underscores the momentum we are building as we transition from construction to production.’
‘Additionally, hitting our first development ore milestone at Mt Mann demonstrates our continued operational success, and strengthens our position as a leading emerging global supplier of battery minerals.’
‘We look forward to advancing our long-term strategy and supporting the transition to a low-carbon future.’
The company has also begun studies on expanding production to 4Mtpa, but the board says that it is ‘considering market conditions‘.
The board is anticipated to make a call on expansion by the end of CY2025.
So what are the market conditions looking like, and should investors consider Liontown?
Outlook for Liontown and the Lithium Market
Despite the positive news and recent operational progress, Liontown’s shares have faced significant headwinds over the past year.
The stock price has declined by around two-thirds — largely on the back of the failed bid — however the share price does also reflect broader challenges in the lithium market and investor sentiment towards the sector.
The electric vehicle (EV) market has shown signs of a slowdown, but it’s not clear that these are longer term trends.
The high EV prices and charging infrastructure challenges have clearly slowed Western adoption, but there are reasons for cautious optimism in the lithium sector.
Expected declines in interest rates could make EV financing more accessible for consumers, while further government support for EV buyers could stimulate demand beyond the early adopters.
Looking further out, the push towards green technologies continues to drive long-term demand for lithium and other battery minerals.
While much of the focus is often on China for its massive EV market and domestic consumption of EVs, other developing countries are catching up.
Source: IEA: (Orange – China, Blue – Europe, Green – USA, Grey – Rest of the world)
Countries like India are seeing increased adoption of electric vehicles, and cheaper models are starting to enter the Chinese market.
Even though Q1 2024 EV sales were down, they still exceeded the annual total from just four years ago.
So, while the short-term outlook for lithium demand may be mixed, a longer-term view could favour investment in the sector.
For those looking at Liontown, the successful execution of its Kathleen Valley project to nameplate production is key to capitalising on any potential future growth in lithium demand.
Investors should continue to monitor Liontown’s progress in ramping up output and broader trends in the EV and energy storage markets.
But demand is half the story here. As BMI senior metals and mining analyst Olga Savina said in June:
‘The current project pipeline suggests that global lithium mine production is expected to more than double from 2024 to 2033.’
Being an early large-scale producer should put Liontown on the map, but a larger scale might be needed if lower lithium prices remain a constant feature in a world of much higher supply.
Liontown today argued that production has stalled for many overseas producers, but analysts are split on that reality being a longer-term trend.
Overall, Liontown remains a stock investors should have on their watchlist as lithium markets mature.
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For Fat Tail Daily
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