Liontown Resources has not only signed its third lithium offtake agreement with Ford but the US car giant will lend $300 million to get the Kathleen Valley lithium mining project in WA up and running.
The announcement sent the lithium developer’s shares up 17% to $1.25 on the ASX, although the enthusiasm waned and the shares fell back to close at $1.12 – up around 5% for the day.
Still it was a notably positive reaction to news from a lithium sector that has been in the doghouse for the past month. Liontown’s gain also came on a day when the wider market fell 0.9%.
Wednesday’s statement to the ASX revealed that Ford will buy up to 150,000 dry metric tonnes of spodumene concentrate.
“Together with the previously announced binding full-form offtake agreements with Tesla and LG Energy Solution, Liontown’s total offtake commitments now stand at up to 450,000 DMT per annum of spodumene concentrate, representing approximately 90% of Kathleen Valley’s start-up SC6.0 production capacity of ~500ktpa,” Liontown said.
“The remaining production from Kathleen Valley is intended to be retained for spot volume sales and/or discrete offtake agreements” Liontown said yesterday.
Just as important was the agreement the two parties signed that will see a $300 million in funding from Ford which will add to the $463 million Liontown raised in December 2021.
“Under a separate Funding Facility, a Ford subsidiary will provide a A$300 million debt facility to Liontown, with the proceeds to be used towards partially funding the development costs of Kathleen Valley.”
Liontown said this means that it has now “secured commitments for the required funds to support the full development of the Project through to first production.”
But the cost of the project has risen. Instead of the original $473 million, the cost is expected to be $545 million.
Liontown says this increase is driven primarily by optimisation and expansion of the front end scope across a range of areas and general cost escalation.
Wednesday’s release noted that this is the company’s current best estimate. Liontown continues to tender and award major construction, equipment, and operational packages of work.
Ford and Liontown have executed a definitive binding full-form offtake agreement for the supply of up to 150,000 dry metric tonnes (dmt) of spodumene concentrate a year for an initial term of five years. This will start from the commencement of commercial production in 2024.
Liontown CEO Tony Ottaviano was happy with the agreements.
“The signing of our third and final foundational offtake agreement is a momentous milestone for Liontown and the Kathleen Valley project, with approximately 90% of Kathleen Valley’s start-up capacity now under secured long-term binding offtake agreements,” he said in Wednesday’s statement.
“Our disciplined approach to our offtake strategy has enabled us to build a customer base of Tier-1, globally significant customers in the EV battery supply chain, validating Kathleen Valley’s status as a globally relevant lithium asset.
“In addition to the offtake, the A$300 million funding facility from Ford, together with the capital raised last year, means that we have secured commitments for the funds required to support the full commercial development of Kathleen Valley through to first production.”
