Liontown secures strategic partnership to deliver long-term funding

Company News

by Glenn Dyer

At one stage in 2023, Liontown Resources (ASX:LTR) announced it had secured a $A1.13 billion funding package to bring its Kathleen Valley spodumene mine in Western Australia into production.

However, as the lithium market experienced a downturn and demand weakened in late 2023, the funding was reduced to $760 million, sourced from banks and a few government agencies, both foreign and local.

Then in January, that package vanished, and the company teetered on the edge of collapse amid rising confusion. A $3 per share offer from Albemarle was withdrawn after Gina Rinehart’s Hancock Prospecting stymied the offer with a raid on Liontown shares. Another funding deal was needed to avoid bankruptcy.

In March, the company announced a $550 million debt facility with a syndicate of lenders, including Commonwealth Bank, National Australia Bank, Société Générale, and the Clean Energy Finance Corporation, to get the mine operational. Liontown stated that the $550 million arrangement had been executed and would be needed in the third quarter. However, on Tuesday, it was revealed that the funds were not available, and trading of shares was halted until Liontown made an announcement about a new funding deal.

It seems the new deal is $379 million (US$250 million) with LG, the South Korean company, specifically with LG Energy Solutions, which is active globally in batteries, renewables, and lithium.

The agreement is a five-year plus five-year offtake deal: Liontown’s spodumene for cash from LG Energy. Additionally, there’s an agreement to study a future lithium refinery, similar to other deals such as Pilbara Minerals' study with a Chinese offtake buyer.

This deal will boost Liontown’s cash reserves to approximately half a billion dollars.

Liontown stated that the full-form agreement with LG "expands the detail on the material terms agreed in the binding terms sheet announced on January 12, 2022, and specifies the operational and logistical requirements for the delivery of the product."

The first five-year term is expected to start this year, with an option to extend for another five years.

LG Energy will buy 100,000 dry metric tonnes (DMT) in the first year, increasing to 150,000 DMT per year in subsequent years. Pricing will be determined using a formula-based mechanism referencing market prices for battery-grade Lithium Hydroxide Monohydrate.

Liontown said the LG Energy deal accounts for roughly one-third of the start-up capacity of up to 500,000 tonnes a year of spodumene concentrate.

The company is also finalizing a deal with Tesla for 150,000 tonnes of spodumene concentrate, meaning 60% of the start-up capacity is accounted for.

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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