The materials sector can be merciless at times. Prone to the occasional oversupply and unceremonious price dumping, the ups and downs through cycles are not for the faint at heart. Few are likely as attuned to this experience as Tim Goyder after the agonising year that has transpired for the Liontown Resources Ltd (ASX: LTR) share price.
As chair and second-largest shareholder of the lithium developer, Goyder watched on while the lion's share of his net worth evaporated during the last four months. From the height of $3.15 per share in 2023 to the sobering 95 cents on Wednesday afternoon, approximately $641 million has been wiped from the entrepreneur's fortunes.
Where did it all go pear-shaped? More importantly, are Liontown's prospects capable of reinstating Goyder's billionaire status?
Lithium riches cost a king's ransom
Between 2021 and early 2023, the lithium industry minted money like nobody's business. A meteoric boom in electric vehicles outpaced supply at the time, sending the price of the battery ingredient to unbelievable heights.
Many shareholders — including board members, management, and founders — witnessed their on-paper wealth explode during this time. However, the price of admission turns out to be steep as the sector grapples with oversupply.
For Liontown Resources, the descending path has looked markedly different to the trajectory of lithium prices, illustrated above. The company's share price and Goyder's wealth were buttressed by a $3.00 per share proposed bid from lithium juggernaut Albermarle Corporation (NYSE: ALB).
Yet, the support was quickly dashed when Albermarle pulled the pin in October. Liontown resorted to tapping debt and equity markets to secure enough funding to develop its Kathleen Valley project independently.
Despite the shored-up finances, the market has had difficulty stomaching the company's market capitalisation. The Liontown share price has toppled 45% since October, reflecting the reinstated uncertainty of a pre-revenue mining company.
What's next for the Liontown share price?
Forging forward, Liontown is continuing with its development efforts at Kathleen Valley. Now chewing through investor capital and saddled with debt, the priority is getting the project to production for Liontown to become self-sustaining. As of last week, the project is at 72% completion.
Following in the footsteps of other ASX lithium shares, the company revealed in its quarterly activities report that it is assessing its operations due to 'short to medium-term lithium price forecasts'. Specifically, Liontown is weighing up delaying its mine expansion until market conditions improve.
Fortunately, some commentators are cautiously optimistic about lithium from here. For example, Jon Bishop of Jarden Securities believes the bottom of the cycle is near. Additionally, restocking in China from late March could boost the electrifying material, according to S&P Global Commodity Insights.
It all sounds positive for the Liontown share price. However, a key moment will come when the miner begins producing lithium. Only then will shareholders know for sure whether it can produce material profitably at the prevailing price.
