Why Liontown (ASX:LTR) could be a lithium share to buy in 2022

This could be a lithium share to buy…

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The Liontown Resources Limited (ASX: LTR) share price has been an exceptional performer over the last 12 months.

During this time, the lithium developer’s shares have almost quadrupled in value.

Can the Liontown share price keep rising?

In light of the incredible rise in the Liontown share price since last year, some investors may be wondering if it’s too late to invest.

The good news is that one leading broker doesn’t believe it is. This week the team at Bell Potter retained its speculative buy rating and $2.15 price target on the company’s shares.

Based on the current Liontown share price of $1.70, this implies potential upside of over 26% for investors.

What did the broker say?

Bell Potter notes that Liontown has just signed a binding spodumene offtake term sheet with leading battery manufacturer LG Energy Solution (LGES).

This five-year agreement is for 150ktpa spodumene with a target specification of 6% Li2O (SC6) at prices linked to industry recognised price reporting indices for lithium hydroxide monohydrate. This represents almost one-third of its initial planned production when it commences in 2024.

Its analysts commented: “LGES is a tier-1 counterparty being one of the premier global lithium ion battery manufacturers. The contract’s linkage to lithium hydroxide price indices preserves LTR’s value leverage to strong lithium markets and also enables LTR to capture some of the margin traditionally held by spodumene to lithium hydroxide chemical converters.”

What else?

Outside this, the broker has previously spoken very positively about the company’s future. Particularly given how its Kathleen Valley Lithium Project is fully-funded.

Bell Potter said: “LTR is funded for Kathleen Valley’s initial development capital. A definitive feasibility study outlined 658ktpa SC6 production with potential for conversion into 86ktpa lithium hydroxide (75ktpa lithium carbonate equivalent, LCE). LTR is independent, debt free with significant uncommitted offtake; a strong strategic position in a market for lithium facing supply shortages. Key catalysts are awarding development contracts, procuring long lead-time equipment, signing offtake contracts and commencing development.”

In respect to lithium supply shortages, earlier this week Liontown’s CEO, Tony Ottaviano, refuted claims that high prices will lead to a supply surge. Particularly given how it takes between five to seven years to bring a mine from the exploration phase to production.

Mr Ottaviano was quoted in the Australian saying: “So all these people predicting tonnes from central Africa in 2023, there’s a classic line in the movie The Castle (‘tell ’em they’re dreaming’).”

Should you invest $1,000 in Liontown right now?

Before you consider Liontown, you'll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Liontown wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of January 13th 2022

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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