Liontown share price roars 17% higher on funding update and 'tremendous endorsement'

It has been a good day for this lithium stock's shareholders.

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Lion holding and screaming into a yellow loudspeaker on a blue background, symbolising an announcement from Liontown.

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The Liontown Resources Ltd (ASX: LTR) share price has returned from its trading halt with a bang.

In afternoon trade, the lithium developer's shares were up as much as 17% to $1.04.

They have pulled back since then but remain up 10% to 98 cents at the time of writing.

What's going on with the Liontown share price?

This morning, Liontown requested a trading halt until Thursday while it prepared an announcement relating to the funding of the Kathleen Valley Lithium Project in Western Australia.

It turns out the company didn't need the two days to make the announcement and has returned early this afternoon following its release.

According to the announcement, Liontown Resources has secured a US$250 million investment and 10-year offtake extension from foundational partner, LG Energy Solution.

Investment secured

These funds will be raised through the issue of five-year convertible notes at a coupon equal to a reference rate of the secured overnight financing rate (SOFR) to maturity. They can be converted or redeemed earlier at a conversion price of $1.80 per share. If converted today, the convertible notes would convert into an approximate 8% shareholding in Liontown.

The company's total cash balance increases to approximately A$501 million following this investment, which provides balance sheet strength to fund the Kathleen Valley ramp-up to 3Mtpa steady state production.

It will also allow the company to progress early enabling works in the underground mine to preserve the 4Mtpa expansion option on a 2027 timeframe and to support 3Mtpa production. Liontown continues optimisation studies for both the mine and the processing plant as part of its review of the 4Mtpa expansion case.

In respect to the offtake, the extension means it is now a lengthy 15-year agreement. It will start with LG Energy Solution taking 100ktpa in the first year and then increases to an average of approximately 150ktpa thereafter.

'A tremendous endorsement'

Liontown Resources' managing director and CEO, Tony Ottaviano, was very pleased with the investment. He believes it demonstrates the quality of the project. Ottaviano said:

I am very pleased to announce that we have taken a major step forward in our strategic partnership with foundational customer LG Energy Solution, one of the world's leading battery producers. LG Energy Solution's long-term investment in Liontown is a testament to the world-class quality of the Kathleen Valley Project and a tremendous endorsement of the capability of our team. The funding will be instrumental in supporting the production ramp up to 3Mtpa and early works necessary to preserve the potential 4Mtpa expansion case for Kathleen Valley.

Lithium refinery

Also giving the Liontown share price a boost today could be news that the two parties are looking into the viability of developing a lithium refinery. This would allow the company to process Kathleen Valley spodumene into battery-grade lithium chemicals. Ottaviano commented:

I am pleased to announce that the strategic partnership with LG Energy Solution will also include entering into a new downstream collaboration agreement to investigate the establishment of an IRA-compliant lithium refinery to process Kathleen Valley spodumene into battery-grade lithium chemicals.

These developments pave the way for Liontown to pursue our long-term strategy to be a globally significant provider of battery minerals as the world transitions to a low-carbon future. We believe this partnership and investment will deliver substantial value to our stakeholders and position us at the forefront of the lithium industry.

The Liontown share price remains down 66% over the past 12 months.

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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