Liontown’s (ASX:LTR) Kathleen Valley gets thumbs up after inking deal with Ford

Highlights:

• ASX-listed mineral explorer, Liontown Resources, has secured a third offtake agreement with Ford.
• Following the agreement, the Kathleen Valley lithium project has now received a green light from Liontown’s board.
• The company has increased the cost estimate for the Kathleen Valley project to AU$545 million from AU$473 million.

Australian mineral explorer and developer, Liontown Resources Limited (ASX:LTR) has been gaining the limelight on Wednesday after the company announced that it has secured the third and final foundational offtake agreement and binding full-form funding facility agreement with Ford.

The final offtake agreement, along with financial commitments, was required to underpin the development of a globally significant lithium project, Kathleen Valley, located in Western Australia.

Meanwhile, the shares of Liontown were spotted trading 8.45% higher from its previous close to trade at AU$1.16 apiece at 10:39 AM AEST. With this, the price surged by nearly 20% in the last five trading sessions. The year-to-date fall is 34%. In five years, the share price increased by a stunning 11,450.00%.

Details of the offtake agreement with Ford

According to the ASX-announcement, Liontown would supply up to 150,000 DMT (dry metric tonne) of spodumene concentrate annually for five years to Ford. The spodumene concentrate will be produced at Liontown’s flagship project, Kathleen Valley.

Liontown expects to deliver the first supply to Ford in 2024. In the first year of operation, 75,000 DMT of spodumene concentrate will be supplied, increasing to 125,000 in the second year and 150,000 for the remaining years.

Under the funding facility agreement, a subsidiary of Ford will provide AU$300 million of debt facility to partially fund the development of Liontown’s Kathleen Valley lithium project.

Paths of Kathleen Valley development are all clear

With the offtake agreement with Ford, LG Energy Solutions, and Tesla accompanied by financial commitments, Liontown’s board has given the green light to proceed with the Kathleen Valley development.

Financial commitments incorporate the funding facility and AU$463 million raised by the company in December 2021.

Considering all the offtake agreements secured by Liontown, the total offtake commitment is up to 450,000 DMT annually for spodumene concentrate. It represents 90% of the lithium project’s start-up SC6.0 production capacity. The company intends to retain the remaining production for discrete offtake agreements or spot volume sales.

Liontown said it is progressing with major contracts with high-quality and established contractors to prepare for project delivery.

Cost estimate of Kathleen Valley

Image source: © Olivier26 | Megapixl.com

Today, Liontown has revised the capital cost estimate of the lithium project from AU$473 million to AU$545 million. The increase in cost estimate is driven by expansion and optimisation of Front-End Engineering Design (FEED) scope across multiple areas and general cost escalation.

The change to the FEED scope would improve the operational flexibility and is expected to improve operating cost and process control over the life of Katheen Valley.

Liontown added that the cost estimates could be revised further in the future.