Own Liontown Resources shares? Here's when it will start producing lithium

It won't be long until this lithium developer becomes a fully fledged miner.

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If you own Liontown Resources Ltd (ASX: LTR) shares then you may be aware that a major milestone is on the horizon.

That milestone is the commencement of lithium production at the Kathleen Valley Lithium Project in Western Australia.

In fact, the company has started to describe itself as the "world's next major lithium producer."

But when will that actually happen? Let's now see what stage Liontown is at in respect to the development of the Kathleen Valley project.

When will Liontown start producing lithium?

Earlier this month, Liontown announced that it had executed an Engineering, Procurement and Construction (EPC) contract with GR Engineering Services Ltd (ASX: GNG).

This $71 million contract is for the delivery and commissioning of the paste plant facility to support the underground mining operations at Kathleen Valley.

Management notes that the Paste Plant will include two trains capable of producing up to 160m3 of paste per hour. It has been designed to accommodate future expansion of mining operations to 4Mtpa.

Commenting on the contract, Liontown's CEO, Tony Ottaviano, said:

We are pleased to award the contract for the design and construction of the Paste Plant which will support and further de-risk the planned underground production rates at Kathleen Valley. GRES has designed and constructed multiple paste plant facilities throughout Western Australia and the GRES team has mobilised and commenced initial works at Kathleen Valley.

This important contract means that Liontown is potentially now just a matter of weeks away from producing lithium at Kathleen Valley.

A presentation this week confirms that the project is more than 90% complete on an earned value basis and its process plant is 94% complete. In light of this, Kathleen Valley is on track for its first production in mid-2024. And given that we are rapidly approaching the middle of the year, this means that production won't be far off.

Liontown is now working on its Dry Plant, including primary crushing through to fine ore bin. Its Wet Plant commissioning has also commenced with SAG mill, air/water service, and floatation.

Should you buy Liontown shares?

Bell Potter thinks investors should be taking advantage of recent share price weakness.

It currently has a speculative buy rating and a $1.85 price target on Liontown's shares. Based on its current share price, this implies a potential upside of 36% for investors over the next 12 months.

The broker is very positive on the potential of Kathleen Valley Lithium Project. It said:

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). Hancock Prospecting has a 19.9% interest in LTR. LTR is an asset development company; our Speculative risk rating recognises this higher level of risk.

Motley Fool contributor James Mickleboro 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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