Liontown shares dip as chair reiterates 'healthy margin' even at today's lithium price

Tim Goyder has reminded investors of the estimated $475 per tonne cost of lithium production at Kathleen Valley.

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The Liontown Resources Ltd (ASX: LTR) share price is down 1.09% to $1.36 in early afternoon trading on Friday.

The ASX lithium share has been through a tumultuous time, losing 52% of its value since United States lithium giant Albemarle Corp (NYSE: ALB) withdrew its $3 per share takeover bid in mid-October.

Here's a 12-month recap of the Liontown share price journey.

The lithium junior held its annual general meeting in Perth after the market close yesterday.

Let's see what management had to say.

Liontown shares lower on Friday

Liontown chair Tim Goyder summarised an "extraordinary year" for the lithium explorer.

He told shareholders that the flagship Kathleen Valley Project remained on schedule for production mid-next year, with construction more than 60% complete.

He added that all major contracts had been awarded and all of the project capital costs committed.

After Albemarle's withdrawal, Liontown was ready to go with a $365 million institutional capital raise and a $760 million debt package supported by all four major Australian banks and others.

The capital raise included a $365 million insto placement at $1.80 per share and a $10.8 million non-underwritten conditional placement to Goyder for six million shares.

The placement to Goyder required shareholder approval at the AGM. The motion sailed through with more than 99% voting for it.

Existing shareholders were also offered a non-underwritten share purchase plan to raise up to a further A$45 million. The offer price was $1.47 per share, and the plan raised $13.8 million.

Goyder said Kathleen Valley was now funded through to production and beyond, commenting:

So now here we are, looking at an independent future once more. A position we are entirely comfortable with.

We had done all the preparation for the debt and equity package and were able to execute promptly following Albemarle's withdrawal.

With funding locked in, we are in a position to complete the construction of the Kathleen Valley project.

What about lithium prices?

Goyder addressed the massive fall in lithium prices over the past 12 months. He said markets "appear heavily focused on short-term price weakness linked with a Chinese destocking cycle".

He commented:

What we've all got to remember is that the lithium market is in its early stages. Short-term price fluctuations are inevitable and can be influenced by multiple factors.

Battery storage and electric vehicle demand is still robust, and they are the key drivers of long-term lithium demand.

The supply response from lithium producers and new entrants to market will take time.

We can expect there will be volatility throughout the cycle. Shorter-term investors may not remember the lithium price drop in 2019 due to a supply glut, before rebounding to new highs.

We are confident that the long-term lithium fundamentals remain strong, supported by the unrelenting global push towards electrification.

Anticipated 'healthy margin' at Kathleen Valley

Goyder pointed out that at the end of FY23, the price of spodumene concentrate was US$3,750 US per tonne. Since then, it has fallen further to about US$1,590 per tonne.

He said Kathleen Valley has an expected decade-average C1 cash cost of about US$475 per tonne.

Therefore, the project "still provides a healthy margin", even at today's lithium prices.

What else is news at Liontown Resources?

This week Liontown announced the appointment of former Fortescue Metals Group Limited (ASX: FMG) CFO Ian Wells to its board as an independent non-executive director.

The company expects Wells to replace retiring board member Anthony Cipriano as chair of the audit committee.

Motley Fool contributor Bronwyn Allen 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 Scott Phillips.

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