Australia’s Liontown Resources said on Tuesday that it had secured $250 million of funding from LG Energy Solution (LGES) along with a 10-year extension to a lithium supply deal from its flagship Kathleen Valley operations.
Liontown shares jumped 15.2% as trade resumed after the announcement.
South Korea-based electric vehicle battery maker LGES offered $250 million in five-year convertible notes secured at a conversion price of A$1.80 per share, alleviating a funding shortfall for the lithium developer that is set for first production later this month.
The funding, added to an existing facility from Ford Motor, replaces a A$550 million ($365.3 million) debt facility that Liontown secured in March for the ramp-up and expansion of Kathleen Valley that expires in October 2025.
“The bank loan was effectively a bridging loan with a whole heap of covenants,” said Hayden Bairstow, head of research at Argonaut in Perth. “This has a five year-term, plus Ford’s facility, they have said is basically enough to get them into production and cashflow positive.”
As part of the deal, Liontown will make available an extra 250,000 tonnes of lithium spodumene concentrate to LGES over the first 10 years of the 15-year agreement.
The parties have also agreed to jointly explore setting up a lithium refinery to process the spodumene produced by Kathleen Valley into battery-grade lithium chemicals.
LGES CEO David Kim said partnering with Liontown would help his company continue to secure a stable supply of critical minerals compliant with the U.S. Inflation Reduction Act.
The Kathleen Valley project in Western Australia remains on budget and on schedule for the first production of spodumene, which is expected by the end of July, Liontown said. Once ramped up, it will produce 3 million tonnes of spodumene concentrate a year.
Spodumene prices are dropping towards three-year lows below $1000 per metric ton and are about $1040 currently, having reversed a small recovery this year. Rising inventories of lithium chemicals should see prices fall another 15% to 20% over the coming months, Citi said.
Reuters