Liontown Resources Ltd (ASX: LTR) shares are having a positive session on Tuesday.
In afternoon trade, the lithium developer's shares are up over 1% to $1.25.
This means that the company's shares are now up almost 15% over the last two weeks.
Should you follow suit and pick up the lithium stock right now? Let's see what one leading analyst is saying.
Are Liontown shares worth buying?
According to a note out of Bell Potter, its team made a visit to the company's Kathleen Valley Lithium Project last week and was pleased with what it saw. The broker commented:
The visit highlighted various strategies implemented to reduce commissioning, ramp-up and ongoing operational risks. These strategies cut across mining ramp-up, plant design and applying learnings from extensive feasibility works and other prominent lithium operations in Western Australia. First production is on schedule for mid-2024.
Bell Potter notes that the company is de-risking its ore supply and processing plant ramp-up. It explains:
The open pit should supply 3Mt ore by the end of 2025, substantially de-risking ore delivery to the processing plant ahead of underground mining ramp-up. Around 160kt ore has been stockpiled to date, with around 300kt of plant feed expected to be available by start-up in mid-2024. Open pit mining rates lift materially this September-October as the thick flat-lying North-West Flats orebody is reached.
In light of the above, the broker remains very positive on Liontown and its shares. The note reveals that its analysts have reaffirmed their speculative buy rating and $1.85 price target on them.
Based on the latest Liontown share price of $1.25, this implies a potential upside of 48% for investors over the next 12 months.
Though, it is worth highlighting that its speculative rating means that this may be an investment that is only suitable for investors with a high tolerance for risk.
Why is the broker bullish?
Bell Potter thinks that the Kathleen Valley Lithium Project is a very attractive asset. It also notes that the company's balance sheet is strong and expected to support Liontown through to positive cash flow. It concludes:
LTR's 100% owned KV 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). The project is on track for first production from mid-2024. Under our modelled assumptions which includes the draw-down of the $550m debt package and repayment of Ford debt, we expect that LTR is fully funded to free cash flow. LTR is an asset development company; our Speculative risk rating recognises this higher level of risk.
