Liontown Resources takes $210m haircut to secure new $550m debt deal for Kathleen Valley lithium mine

Liontown Resources has tapped two of Australia’s biggest commercial lenders for a new debt deal that will usher its Kathleen Valley lithium mine in the Goldfields into first production. The $550 million facility is markedly smaller than the $760m deal that was pulled by backers earlier this year as nerves began to show when lithium prices plunged by more than 80 per cent. The new debt plugs a huge funding gap for Liontown and its Kathleen Valley project in the Goldfields, and is hoped to take it through to first production, due mid-2024, and build up capacity to process three million tonnes of spodumene concentrate a year. Investors breathed a sigh of relief on the news. Liontown shares soared more than 10 per cent in early trade to $1.45 but settled to $1.40 at Wednesday’s close. Two of Australia’s big four banks are on board with the project, Commonwealth Bank and the National Australia Bank, alongside France’s Societe Generale. Westpac, ANZ and HSBC had been in the previously announced funding syndicate but are not part of the newly-agreed loan, which also comes with less flexible terms for Liontown this time round. ANZ declined to respond to The West Australian’s requests for comment regarding its appetite for lending for lithium projects and Westpac was yet to respond at the time of writing. Liontown is due to make its first lump sum payment in October 2025, by which time Liontown will be banking on lithium prices staging a comeback so it can make more money from spodumene concentrate sales. Seemingly unperturbed by lithium’s murky short-term outlook, Australia’s ‘green bank’, the Clean Energy Finance Corporation, has backed the project for $110m. This is the biggest loan the Government-owned bank has made to the resources sector since being founded some 12 years ago. “This important project has the potential to further shift the dynamics of lithium production in Australia,” CEFC executive director for WA and resources Rob Wilson said. “Lithium is one of several key minerals that will underpin the global energy transition, and is becoming a major export earner for Australia.” Another taxpayer-funded agency, Export Finance Australia, will lend $120m. Liontown’s managing director Tony Ottaviano said the facility would provide a platform of financial certainty as the project heads towards first production. “We are consequently well-positioned to deliver the remaining milestones to first production mid-year and ramp-up towards anticipated positive cashflows,” Mr Ottaviano said. Money drawn will be used to refinance an existing $300m debt facility with automotive giant Ford, fund construction and ramp-up of the project and to provide working capital. A fall in spodumene prices saw initial backers tear up their $760m agreement in January. Liontown announced a project review to examine options to defer the timing of its 4mtpa underground development work, changes to the mine plan, and scope for “additional cost optimisations”. The company is due to report the results of the review within the next three months. Prices of lithium spodumene have regained some lost ground in recent weeks but are still languishing at just over $US1000 a tonne, compared with more than $US7500/t the same time last year, as the uptake of electric vehicles progresses slower than many anticipated. First production at Kathleen Valley is slated for the middle of this year and was last estimated by Liontown to cost $951m to bring online.