With the Tier 1 potential of its Kathleen Valley project, Liontown Resources is setting itself up to be a big lithium player.
The rise of Liontown Resources has been one of honesty, studiousness and discipline.
The emerging Australian lithium company has cultivated its business profile and assets patiently and observantly, understanding no success is gained from jumping the gun.
At the beginning of September 2020, Liontown’s share price was hovering around the $0.10 mark. A year later, the company clocked $1.
Liontown has steadily appreciated since then, as its flagship Kathleen Valley lithium project in Western Australia has grown sturdier by the day. At the time of writing, Liontown shares were trading at $1.44 and the company had a market capitalisation of $3.15 billion.
The Liontown fortune has been created despite receiving zero revenue from Kathleen Valley. While the lithium revival has assisted the company’s appeal, there’s more to the story.
“Once we hit the downturn in lithium, under the leadership of (Liontown chair) Tim Goyder the company decided they knew they had something significant, but the time was not right for the company to go out with another lithium project,” Liontown managing director and chief executive officer Tony Ottaviano told Australian Mining.
“So they decided to bunker down and work on further definition, further test work, further analysis and study to make sure that when the market did turn they were in the right position to be able to take the company forward quite quickly.”
Lithium prices plummeted in 2019 following an overcompensation in the market. There was an oversupply of lithium as producers increased their output, yet there wasn’t the same demand many had forecasted.
Liontown acquired Kathleen Valley from Ramelius Resources in August 2016. Years of drilling ensued and as the downturn hit, Liontown cranked up its exploration program, confident in the knowledge the market would recover.
“Liontown spent more money on drilling the orebody out and they grew the resource, almost tripled it. Then they knew they had a world class Tier 1 asset,” Ottaviano said. “So when I joined they’d just finished their pre-feasibility study (PFS). I picked it up and we started doing the detailed feasibility study.”
Ottaviano was appointed to Liontown’s top post in May 2021 after 17 years at BHP, taking over from longstanding managing director David Richards.
Liontown completed the Kathleen Valley definitive feasibility study (DFS) in November 2021, increasing the project’s initial production base from two million tonnes per annum (Mtpa), as set out in the PFS, to 2.5Mtpa.
The DFS indicated Kathleen Valley had the capacity to produce approximately 500,000 tonnes per annum (tpa) of spodumene concentrate, with the potential for a 4Mtpa project expansion in year six, to deliver approximately 700,000tpa of spodumene.
Also in November 2021, Liontown and the Tjiwarl Native Title Holders signed a native title agreement regarding Kathleen Valley, following two-and-a-half years of collaboration between the lithium company and the Tjiwarl Aboriginal Corporation RNTBC (Tjiwarl AC).
The Tjiwarl AC is the prescribed body corporate for the Tjiwarl Native Title Holders and represents 11 families connected by culture and country within the Tjiwarl Country determination area.
Tjiwarl Country spans 13,000 square kilometres of land and waters between Leinster and Wiluna in WA’s northern Goldfields region.
To reduce the impact on cultural heritage sites, Liontown redesigned the Kathleen Valley mine plan in consultation with the Tjiwarl AC to be a predominantly underground operation instead of the originally-planned open pit.
“One of the proudest moments so far in my tenure as managing director of Liontown was the signing of the native title agreement in November last year with the Tjiwarl,” Ottaviano said.
“We’re very proud of the Traditional Owners, the Tjiwarl, and how they’ve helped us. They will continue to help us and we’ll continue to work as a partnership.
“We are the first native title agreement signed since Juukan Gorge and I’m telling you how significant that is given what happened.”
In May 2020, Rio Tinto conducted a blast as part of its extension of the Brockman 4 iron ore mine in WA, devastating Aboriginal heritage sites at Juukan Gorge, including two culturally and archeologically significant rock shelters.
This occurred despite the Puutu Kunti Kurrama and Pinikura (PKKP) Traditional Owners repeatedly suggesting they wanted to protect the site.
The PKKP found out about the planned blast in mid-May and issued an urgent request to stop the detonation. The rock shelters were ultimately destroyed on May 23.
With the native title agreement in place and having completed the Kathleen Valley DFS, Liontown undertook an institutional placement and raised $450 million in December 2021.
The company signed its first Kathleen Valley offtake agreement in January 2022, inking an initial five-year deal with South Korea battery maker LG Energy Solution for the supply of up to 150,000 dry metric tonnes per annum (dmtpa) of spodumene.
A month later, Liontown signed its second Kathleen Valley offtake agreement, linking up with Tesla for a similar five-year deal also involving the supply of up to 150,000dmtpa of spodumene.
Liontown had thus sewn up 60 per cent of Kathleen Valley’s initial production capacity in two deals. Both deals commence in 2024, when Liontown aims to start production at Kathleen Valley.
But offtake agreements are a two-way street and Liontown has been incredibly judicious in the process.
“Our offtake strategy has three elements to it,” Ottaviano said. “Get customers that are diversified by geography; get customers that are diversified for position on the value chain; and then get diversity of contract type, be very smart in the way we construct the contracts.
“So with geography, we want to be positioned globally so that we’re not reliant on one particular geography to sell into. And we’ve got North America, we’ve got Korea, and we’ll potentially look at maybe a couple of other jurisdictions. So good coverage there.
“The second one is position on the value chain, which is arguably the most important, I believe. And the reason being is we want to be as close as possible to where the technology is being adopted, and where it’s being designed.
“Because if I’m sitting back in the raw material area, and there’s changes in technology – and the battery world is changing constantly – I don’t want to be flat-footed. I want to know it before anyone else does. Then I can be agile and move my product suite accordingly.
“For example, if hydroxide doesn’t become the chemical of choice downstream and it moves to lithium sulphate, I’ll know that before. If I’m only dealing with a converter, I’m blind.”
Spodumene has typically been converted into lithium carbonate or lithium hydroxide before it is used to make batteries. However, advancements are always imminent in the ever-changing world of battery development.
As Liontown continues to de-risk Kathleen Valley, the company has its sights set on the final investment decision (FID) expected in the second quarter of 2022.
“The critical milestone coming up now is the FID, which we’re planning to do in June of this year,” Ottaviano said. “Leading up to the FID the board needs to have comfort around a number of things.
“Firstly, have we got offtakes in place? We’re working well in that regard.
“The second thing we need to put in place is the funding. Have we got this project fully funded? We’ve raised $450 million – so we’ve done the equity piece – we’re now in discussions with the banks to provide our final debt funding.
“The third thing we need to have across the line for the board is permitting.”
Liontown’s native title agreement with the Tjiwarl Native Title Holders has enabled the remaining Kathleen Valley permitting submissions to be finalised, which will occur ahead of the FID.
Following a positive FID, Liontown will ready itself to commence the Kathleen Valley build, with ambitions to complete construction by the December quarter of 2023. Commissioning would then take place in the March quarter of 2024, paving the way for first production in the June quarter of 2024.
All signs suggest Liontown has the potential to become a major player in the global lithium market. With Kathleen Valley’s Tier 1 potential, it’s not a matter of if, but when.
This article also appears in the April edition of Australian Mining.