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

This could be a lithium share to buy…

| More on:
A smiling woman holds an arm in the air in triumph while also holding a graphic of a fully-charged battery in her other hand representing the Pilbara Minerals share price

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

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’).”

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.

More on Broker Notes

A young woman with her mouth open and her hands out showing surprise and delight as uranium share prices skyrocket
Broker Notes

Here are 2 ASX lithium stocks analysts rate as buys

These lithium stocks have been rated as buys today...

Read more »

Two male ASX investors and executives wearing dark coloured suits sit at a table holding their mobile phones discussing the highest trading ASX 200 shares today
Dividend Investing

Here’s the Telstra dividend forecast through to 2024

The Telstra dividend could be increasing in the near future...

Read more »

A person sitting at a desk smiling and looking at a computer.
Consumer Staples & Discretionary Shares

2 ‘high quality’ ASX shares now going for a discount: Elvest

While financial forecasts this reporting season might be scary, here is a pair of stocks that might resist the coming…

Read more »

Man sitting in a plane seat works on his laptop.
Travel Shares

It’s gained 60% in 2 years, does the Webjet share price still have room to grow?

The travel stock has blue skies ahead according to these brokers.

Read more »

Two men in business attire play chess.
Resources Shares

OZ Minerals ‘completely in play’: Broker on BHP takeover bid

BHP's bid for OZ Minerals may not be over...

Read more »

a corporate-looking woman looks at her mobile phone as she pulls along her suitcase in another hand while walking through an airport terminal with high glass panelled walls.
Travel Shares

‘Downside is less severe’: Why some brokers are still bullish on the Qantas share price

This airline could see its shares fly higher.

Read more »

Two boys lie in the grass arm wrestling.
Investing Strategies

‘Cult following’: Expert names 2 ASX shares worth buying in August

There are plenty of catalysts to choose from during reporting season. Here's a pair of stocks that might move upward.

Read more »

A man reacts with surprise when her see a bargain price on his phone.
Cheap Shares

‘Capital light and scalable’: Expert picks 2 ASX shares to buy now while CHEAP

Who likes bargains? Pick up these beauties from the discount bin, says one financial advisor.

Read more »