Liontown Resources Ltd (ASX: LTR) shares were under pressure again on Wednesday.
The lithium miner's shares ended the session down by 4.5% to 85 cents.
This means its shares are now down a sizeable 46% since this time last year.
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Why did Liontown shares drop?
Investors were selling the miner's shares following the release of its first quarterly update since commencing production at the Kathleen Valley Lithium Project in Western Australia.
Management revealed that its production progressed to plan with volumes totalling over 28,000 dry metric tonnes (dmt) of spodumene concentrate for the eight weeks since first production with an average concentrate grade of 5.2% Li2O.
While the market didn't respond positively to the update, the team at Bell Potter has described the quarter as "highly encouraging."
Commenting on the quarter, the broker said:
The quarter was highly encouraging from an operational perspective with the company illustrating two months of processing plant performance and reiterating previously stated ramp-up targets relating to plant throughput and recoveries. LTR expect to update the market on project optimisation outcomes and its refreshed operating cost estimates in the current quarter. The key focus is on cash generation given current market conditions through optimising production levels, mine sequencing (mining costs and grades) and concentrate product grades.
Big returns
Bell Potter has made no changes to its estimates or valuation following the update. This means that big returns could be on the cards for investors buying at current levels.
According to the note, the broker has retained its speculative buy rating and $1.50 price target on Liontown's shares. Based on its current share price, this implies potential upside of 76% for investors over the next 12 months.
To put that into context, this would turn a $5,000 investment into approximately $8,800 if Bell Potter is on the money with its recommendation.
Though, it is worth noting that its speculative rating means it would only be suitable for investors with a high tolerance for risk.
Commenting on the lithium miner, the broker concludes:
LTR's 100% owned Kathleen Valley lithium project remains highly strategic in terms of scale, long project life and location in a tier-one mining jurisdiction. LTR has offtake contracts with top-tier EV and battery OEMs. Under our modelled assumptions, 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.
