The Liontown Resources Ltd (ASX: LTR) share price is ending the week deep in the red.
At the time of writing, the lithium developer's shares are down 10% to $1.35.
Why is the Liontown share price crashing?
Investors have been selling down the Liontown share price on Friday following the release of an update on the company's Kathleen Valley Lithium Project in Western Australia.
That update reveals that that construction of the project is going to cost more than previous estimates, which appears to have sparked fears that a capital raising may be required.
This is the second time that the capital cost of the project has been revised higher in a little over six months.
According to the release, additional scope and cost escalation has resulted in Kathleen Valley's estimated capital cost to first production from the process plant increasing to $895 million inclusive of $40 million in contingency.
As a comparison, in June, Liontown revised its pre-production capital cost estimate from $473 million to $545 million.
The issue here is that Liontown revealed that it has spent $73 million on the project to date, bringing down the remaining capital cost of to $822 million including its contingency funds. However, it only has ~$685 million of remaining funds, comprising ~$385 million in existing cash reserves and $300 million via a debt facility.
Liontown advised that it is progressing a range of potential further funding options. Though, additional funding is not currently expected to be required until the end of 2023.
It also notes that it sees opportunities to generate revenue through a Direct Shipping Ore (DSO) opportunity designed to monetise material not previously expected to be processed. This is what Core Lithium Ltd (ASX: CXO) did recently, raising somewhere in the region of US$14 million.
Production expansion
Despite what the Liontown share price might indicate, the announcement wasn't all bad news for shareholders of the ASX 200 lithium share.
Management revealed that the company has optimised the plant capacity design to deliver a 20% increase in the initial plant throughput rate to 3Mtpa (up from 2.5Mtpa).
This is expected to drive increased SC6.0 production to take advantage of strong short- and medium-term forecast lithium pricing.
Finally, it also confirmed that the Kathleen Valley Project remains on-track for first production from the process plant in mid-2024, with prudent scope adjustments made early in the construction schedule to further de-risk and maintain this timing.
