Operating costs behind lithium miner Liontown’s losses as first production approaches

Higher operating costs and expenditure related to the failed takeover bid from US giant Albemarle have hit the bottom line of Gina Rinehart-backed lithium player Liontown Resources.

Workers at Liontown Resources' Kathleen Valley project in Western Australia.

Higher operating costs and expenditure related to the failed takeover bid from US giant Albemarle have hit the bottom line of Gina Rinehart-backed lithium player Liontown Resources, with the company’s losses widening as it nears first production at its flagship Kathleen Valley mine in Western Australia.

The company’s half-year accounts, released on Friday, reveal its net loss increased to $31.3m in the six months to December, up from a loss of $6.9m in the previous corresponding period.

Higher labour and exploration costs drove the result, while it was revealed $4.1m was spent during the period on costs associated with the proposed takeover by ­Albemarle.

The $6.6bn takeover bid collapsed in October after Ms Rinehart’s Hancock Prospecting built up a blocking stake of 19.9 per cent in the lithium hopeful.

The half-year results were released two days after Liontown announced that it had secured a $550m loan from a syndicate of lenders, soothing concerns about its finances as it looks to ramp up activities at Kathleen Valley.

Liontown had earlier, in October, agreed on a $760m package with a consortium of banks and government lenders, but the offer was withdrawn in January on the back of lower lithium price forecasts.

Just three of the six commercial banks that had signed on in October are backing the latest debt package, which is also backed by government agencies Export Finance Australia and the Clean Energy Finance Corporation. They are chipping in a total of $230m.

In Friday’s half-year report, ­Liontown said the funding would see it through to the second quarter of calendar year 2025, when it expected to be begin generating “sustained positive net cash flows”.

“Whilst not the group’s current expectation given the advanced nature of development activities at the date of this report, and consequent expected date of first concentrate production, should there be a delay in achieving first concentrate production, or the group starting to generate sustained positive net cash flows as the project ramps up towards commercial production, the group’s funding requirement may be in excess of the debt facility,” the report says.

“The group continues to explore options for a longer-term funding solution to provide future flexibility and optionality beyond the debt facility. It is possible that a longer-term funding solution could be implemented prior to any drawdown of the debt ­facility.”

Liontown expects to begin production at Kathleen Valley by the middle of this year, at an estimated capital cost to first production of $951m.

Lithium prices have crashed from their heady highs of late 2022, when they were four to five times what they are now.

That has led to a crash in the stock prices of Australian producers and explorers, while once promising projects are being scaled back and even shelved.

Liontown is reviewing its plans at Kathleen Valley, where it initially had plans to ramp up annual production from three million tonnes to four million tonnes in the sixth year of the project.

The company’s shares are well down from the $3.19 during the days of the takeover tussle with Albemarle, and slipped a further 8.4 per cent on Friday to $1.25.