Today, Liontown Resources [ASX:LTR] announced that its Kathleen Valley Lithium Project is on track for mid-2024 production. The company has published significant progress on both the mining and construction fronts.
Liontown shares were down by 0.9% today, trading at $2.76 per share, along with much of the materials sector, as the company attempts to regain momentum in the face of falling lithium prices.
Liontown has been the second-highest gainer on the ASX 200 this year with an astonishing gain of 116.86% in the past 12 months.
With production on track, what are the potential challenges still ahead for the $6.14 billion market cap miner?
Liontown released an update today on the progress of construction and mining at its Kathleen Valley Project, saying it’s on track to begin production in mid-2024.
The Kathleen Valley Lithium Project is one of the largest lithium projects in Australia. It is expected to produce up to 1.1 million tonnes of spodumene concentrate per year.
The project is in the Goldfields region of WA and currently holds an MRE of 156 million tonnes at 1.4 Li2O with an expected mine life of 20 years.
Progress has been steady so far, with no lost-time injuries recorded for the quarter, and 326,000 site hours logged, up from 211,000 in the March quarter.
A Full Open Pit Mining Services Contract was awarded to Iron Mine Contracting to complete surface mining operations.
At the same time, the evaluation of bids for the Underground Mining Services is reported to be ahead of schedule.
Total Material Movement (TMM) for the quarter increased to 1.55 million bulk cubic metres.
Plant and supporting building construction have also kept a good pace with more than 50% of concrete poured by the end of June, seeing significant progress in its hybrid power station.
Liontown CEO Tony Ottaviano said he was pleased with the progress made at Kathleen Valley during the quarter, saying:
‘We are on track to deliver first production from Kathleen Valley in mid-2024, and we are continuing to make good progress on the construction of the project. We are also advancing our commercial opportunities, and we are confident that Kathleen Valley will be a major contributor to the global lithium supply.’
Liontown has been the focus of many in the industry since it rejected a substantial bid by lithium giant Albemarle back in March this year.
The $2.50 bid was a 63% premium on the share price at the time. But upon rejecting the bid, the share price rose by 70% and maintained its momentum through the second quarter.
With lithium prices now in the balance, what is the trajectory for Liontown Resources?
Outlook for Liontown
With notable progress being made on this tier one mine, the addition of this project will cement Australia as the top lithium producer for the foreseeable future.
Whether Liontown’s share price continues to outperform again depends largely on lithium prices this year.
Some analysts are predicting significant price declines, which would lead to significant selling pressure on the stock in the medium term.
China’s future could be the lynchpin for lithium markets as its massive EV market and refining account for approximately 70% of global demand.
The Chinese slowdown has impacted demand and left lithium prices in an uncertain position.
Speculation has continued to swirl about other suitors circling the Lionstown for a potential bid despite a release in May saying no further offers had been received.
While nothing formal has been put forward, it could still be on the cards as the company continues to move forward with downstream processing studies.
These studies will identify suitable sites for refineries in WA and establish a clear scope for the final product — either as intermediate lithium products or the expensive to produce lithium hydroxide.
The refining direction chosen could be significant to rivals in the space and the industry at large, which has struggled to compete against the scale of refining China has in final battery products.
The development and direction of newer battery technology may also hang over these companies as alternatives like sodium-based batteries could compete for the EV market share.
There is still no alternative found for the astonishing level of copper required for these cars, with an average EV requiring 80 kilograms of red metal — as well as the growing demand for electrical grids.
Copper could be the next one to watch
As countries move towards net-zero policies and EV sales continue to grow, copper demand is set to rise.
This could mean we outstrip the current supply and enter a red drought of this critical metal.
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