New $550m loan to progress Kathleen Valley lithium project

Liontown Resources Limited (ASX: LTR) has entered into a $550m debt facility agreement with a syndicate of international and domestic banks and government credit agencies to fund its Kathleen Valley lithium project through first production and ramp-up to 3mtpa.

This comes as the miner announced at the start of this year that the initial commitment of a $760m debt funding package was pulled due to a fall spodumene and lithium prices.

The current debt facility provides financial certainty and sufficient time for Liontown to complete the previously announced review of Kathleen Valley’s 4mtpa expansion, including opex and capex requirements.

Liontown managing director and chief executive Tonny Ottaviano says the company is very pleased to announce the new debt funding facility.

“I would like to acknowledge our lending syndicate for their support which once again reinforces the world class qualities of the Kathleen Valley project,” he said.

“Having this funding in place provides strong endorsement for our project and a platform of financial certainty from which to move forward.

“We are consequently well-positioned to deliver the remaining milestones to first production mid-year and ramp-up towards anticipated positive cashflows.”

The syndicate of lenders comprises Commonwealth Bank of Australia, National Australia Bank Limited and Societe Generale, Export Finance Australia and Clean Energy Finance Corporation.

Liontown has fully drawn down its $300m project funding package from Ford and proceeds from this current debt facility will be used to refinance existing Ford debt.

The company also continues to explore longer-term funding options beyond the 3mtpa base case.

Kathleen Valley remains on schedule and budget to commence first production in the middle of CY24.

At the end of CY23, the lithium project was more than 72% complete, with the commencement of underground mine development in November last year.

“We announced that we have commenced a review to examine the options of deferring the mine expansion from 3mtpa to 4mtpa until market conditions improve,” Mr Ottaviano said in the company’s December 2023 quarterly activities report.

“The decision to undertake a review of the planned expansion and associated ramp-up of Kathleen Valley was based on short- to medium-term lithium price forecasts, which have materially declined in recent months, including an almost 60% drop since October 2023.

“This will allow us to preserve capital and reduce the near-term funding requirements of the project as we seek to finalise a smaller, fit-for-purpose debt facility to see us through to first positive cash flows from Kathleen Valley.

The lending syndicate remains highly supportive of the Project.

“This change is indicative of commodity cycles and we will retain optionality to pivot again when the market turns to increase production volumes.

“We have around A$515 million in the bank, which will see us through to first production at Kathleen Valley.”