Liontown Resources Ltd (ASX: LTR) shares had a terrible time on Monday.
The lithium developer's shares crashed as much as 26% to a 52-week low of 89 cents after releasing an update on its Kathleen Valley Lithium Project in Western Australia.
That update revealed that the company has commenced a review of the planned expansion and associated ramp-up of Kathleen Valley to preserve capital. It also revealed that a recently announced $760 million debt funding package had been terminated by its lenders.
Both actions were in response to weak lithium spodumene prices.
The Liontown share price would go on to recover a touch before closing the day 21% lower at 94 cents.
Should you buy Liontown shares?
The team at Bell Potter believes that this could be a buying opportunity for investors with a high risk tolerance.
This morning, the broker has retained its speculative buy rating on its shares with a reduced price target of $1.60 (from $2.25).
Based on where Liontown shares closed yesterday's session, this implies 70% upside for investors over the next 12 months.
What did the broker say?
In respect to the funding, Bell Potter believes a new $500 million funding package would be sufficient. It said:
LTR's previous funding package allowed for a cash liquidity buffer of A$350m. We expect that through a combination of reducing this buffer and deferring expansion capex, LTR can maintain sufficient funding for Kathleen Valley's completion and commissioning on debt funding of around A$500m (from A$760m). Near-term lithium prices and LTR's cost profile during ramp-up remain a key risk. However, we also expect other forms of strategically aligned finance may be available, if required.
In addition, the broker highlights that it remains very positive on the Kathleen Valley Lithium Project and sees it as a highly strategic operation. It commented:
We have reduced our LTR valuation to $1.60/sh (previously $2.25/sh) to account for heightened funding risks. LTR's 100% owned Kathleen Valley lithium project remains highly strategic in terms of its stage of development, long mine life and location. LTR has offtake contracts with top tier EV and battery OEMs (Ford, LG Energy Solution and Tesla). Hancock Prospecting has a 19.9% interest in LTR.
