Liontown Resources has secured a $379 million investment and a 10-year offtake extension from foundational partner LG Energy Solution in relation to its flagship Kathleen Valley lithium project in Western Australia.
The investment will take the form of five-year convertible notes secured at a conversion price of $1.80 per share and a coupon equal to a reference value of the secured overnight financing rate published by the Reserve Bank of New York.
LG’s investment will also allow Liontown to progress early enabling works at Kathleen Valley’s underground mine to preserve a 4 million tonnes per annum expansion option by 2027.
Cash balance boost
The notes are expected to boost Liontown’s total cash on hand to $501m, providing balance sheet strength to fund ramp-up activities at Kathleen Valley to a 3Mtpa steady-state production.
The new notes will replace a $550m debt facility secured in March for the ramp-up work with a syndicate of international and domestic commercial banks and government credit agencies.
Liontown has appointed Allens as the legal adviser for the transaction, while Greenhill & Co and UBS will act as financial advisers.
Offtake extension
The 10-year offtake extension will increase an existing five-year offtake agreement with LG for the supply of high-quality lithium spodumene from Kathleen Valley.
Liontown will now provide 700,000t of spodumene concentrate at a targeted 6% lithium oxide grade over the first five years and 1.5Mt for the remaining 10-year period.
The extension also includes a commitment to make up to 250,000t of spodumene concentrate available over the first 10 years, taking the total volume supplied under the 15-year agreement to 2.45Mt.
Downstream collaboration
Liontown and LG have signed a downstream collaboration agreement to investigate the feasibility of establishing a conversion plant to process LG’s offtake material and additional tonnage from Kathleen Valley’s expansion.
The plant would be compliant with the US Inflation Reduction Act and designed to process spodumene from Kathleen Valley into battery-grade lithium chemicals.
The companies will embark on feasibility and optimisation studies to evaluate site selection, economic viability and sustainability considerations.
Formalised partnership
Liontown managing director Tony Ottaviano said the company was pleased to be taking a “major step forward” in its strategic partnership with LG.
“We are very pleased to formalise this partnership with one of the world’s leading battery producers,” he said.
“It marks a significant milestone in our journey towards becoming a globally significant supplier of battery minerals as the world transitions to a low-carbon future.”
“LG’s long-term investment in Liontown is a testament to the world-class quality of the Kathleen Valley project and is a tremendous endorsement of the capability of our team.”
Competitive solutions
LG chief executive officer David Kim said the agreement was a step in the right direction for both companies.
“This agreement represents a significant move in our value chain investment strategy aimed at enhancing resilience to market uncertainties,” he said.
“By partnering with strong players like Liontown, we will continue to secure stable supply of IRA-compliant critical minerals and fulfil our efforts to provide competitive power solutions for electrification.”
The Kathleen Valley project remains on track for first production by month-end, with approximately $120m of Liontown’s cash balance still to be spent on completion of construction and commissioning.
