The Liontown Ltd (ASX: LTR) share price is under pressure on Thursday, down 4.91% to $2.035. The move follows the release of the company's December quarterly update and a separate capital markets announcement.
Here's what investors need to know.
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A turning point quarter at Kathleen Valley
The December quarter saw Liontown start to deliver on its long-awaited ramp-up.
The company successfully completed open-pit mining at Kathleen Valley and transitioned to a fully underground operation. Underground ore mined jumped 37% quarter on quarter to 308kt, while development metres increased 17%.
Liontown processed 642kt of ore during the quarter and produced 105,342 dry metric tonnes (dmt) of spodumene concentrate, up 21% on the prior quarter. Lithium recoveries improved to 63%, and plant availability held steady at 92%.
Costs also moved in the right direction. Unit operating costs fell 17% quarter on quarter to $910 per dmt sold, while all-in sustaining costs (AISC) declined 22% to $1,059 per dmt. The company also reported operating cash flow at breakeven, a significant improvement from the prior period.
Management reiterated that underground ramp-up remains on track, with production targeted to reach 1.5Mtpa by the end of FY26 and 2.8Mtpa steady state by FY27.
Pricing, sales, and liquidity improve
Liontown generated $130 million in revenue during the quarter after selling 112,122 dmt of concentrate at an average realised price of US$900 per dmt on a SC6 basis.
SC6 is a standard grade of lithium concentrate containing about 6% lithium. It is the main product sold by hard-rock lithium miners.
One positive was Liontown's first spot auction, which cleared at US$1,254 per dmt SC6. This showed buyers are willing to pay up outside long-term contracts. Liontown also signed a new binding offtake agreement with Canmax, giving it greater flexibility and more exposure to spot pricing.
The balance sheet remains strong. Liontown finished the quarter with $390 million in cash and 13,800 dmt of saleable concentrate on hand.
LG conversion removes a major overhang
Alongside the quarterly update, Liontown confirmed LG Energy Solution will convert its US$250 million convertible note into shares.
As a result, LG will own about 8% of the company. While this increases the number of shares on issue, it removes future interest costs and clears a long-standing uncertainty for investors.
After the conversion, Liontown will have no remaining convertible debt and more flexibility to fund growth.
Foolish Takeaway
The company delivered a materially stronger operational quarter and removed a major overhang from its balance sheet. But with expectations high, the market appears to be focusing on near-term risks rather than longer-term progress.
Liontown is coming out of a heavy investment phase, with costs easing and underground production continuing to ramp up. If execution holds, the recent share price weakness may look attractive to patient investors.
