Liontown’s lithium DSO move could have regional lithium players pondering a similar strategy

Liontown Resources will sell direct shipping ore (DSO) from its Kathleen Valley lithium project ahead of concentrate production
This is a well-established strategy taken by lithium luminaries such as MinRes, Pilbara Minerals and most recently Core Lithium who exported DSO as they were ramping up operations
Delta Lithium plans to start DSO mining operations by the end of this year; Widgie Nickel has also lodged a Mining Proposal for DSO mining

The draw of early revenue has proven to be irresistible for market darling Liontown Resources (ASX:LTR), which has moved to deliver direct shipping ore (DSO) from its Kathleen Valley lithium project ahead of concentrate production.

In January, Liontown identified an opportunity to monetise additional material liberated from the revised mine plan that was not part of the Ore Reserve and would otherwise be stockpiled.

Since then, it has stockpiled about 70,000t of DSO product whilst undertaking a financial evaluation, conducting ore sorting test work and engaging prospective offtake customers.

With ore sorting achieving positive results and commercial discussions with potential customers well advanced, the company decided to sanction the project and expects to sell between 250,000t and 300,000t of DSO material prior to first concentrate production.

DSO stockpile at Kathleen Valley, May 2023. Pic: Liontown

It has executed a contract with Axis Mineral Services for the crushing, screening and sorting of the DSO material from the fourth quarter while its recent concentrate haulage contract with Qube Holdings Limited included the flexibility to transport the DSO product.

As a further benefit, the DSO crushing and sorting program will provide the company with crucial real technical data to assist in the design of a potential large-scale ore sorting circuit as part of the planned 4Mtpa circuit expansion.

An established path to early $$

Liontown isn’t the only company to sell DSO to fast track cashflows. It is following a well-established pathway taken by lithium luminaries such as MinRes (ASX:MIN), Pilbara Minerals (ASX:PLS) and most recently Core Lithium (ASX:CXO) who exported DSO as they were ramping up operations.

After all, while this ore typically contains around 1-2% lithium and fetches a lower price compared to the industry benchmark 6% spodumene concentrate, it is also relatively unprocessed and hence a lot cheaper and easier to produce.

Taken as an interim step while getting concentrate production up and running, it lets the company start filling in the cashflow column on their balance sheets sooner, which is always popular with shareholders – when done right.

Delta Lithium (ASX:DLI) is already on the same path with plans to start DSO mining operations at its Mt Ida project by the end of this year.

While the project already has a resource of 12.7Mt at 1.2% lithium, Delta recently launched a 25,000m drill program across both Mt Ida and Yinnetharra further to the north.

Said drilling is already starting to bear fruit, returning assays such as 33m at 1.9% Li2O from Yinnetharra.

Meanwhile, Widgie Nickel (ASX:WIN) has lodged a Mining Proposal for DSO mining at Faraday where exploration drilling to the north has unearthed the new Trainline near surface lithium prospect.

It noted in its June 2023 quarterly report that offtake discussions for the DSO product progressed positively during the quarter and are nearing the final stages.

Just a little further off

While the companies listed below have projects that are at a much earlier stage in their lives, the DSO plans that Liontown, Delta and Widgie have embarked on have almost certainly given them food for thought.

Future Battery Minerals (ASX:FBM)

Shallow, thick, high-grade lithium. Three magic terms that Future Battery Minerals can use to describe its Kangaroo Hills lithium project that’s just 17km south of Coolgardie.

While it is still early days and there’s also no guarantee that DSO is under consideration, having a shallow, thick and high-grade lithium deposit happens to be nearly everything that you need to make it work.

Recent diamond drilling at the Big Red prospect had demonstrated the continuation of high-grade lithium hosted within spodumene-bearing pegmatites that were highlighted in earlier reverse circulation drilling.

A third phase of RC drilling is currently underway at the project to continued testing Big Red as well as regional prospects at Rocky, Eastern Grey, Wallaroo and Pademelon.

Further diamond drilling will also be carried out to complement the RC drilling program.

Metal Hawk (ASX:MHK)

Metal Hawk recently acquired the 282km2 Yarmany nickel-lithium project just 40km northwest of Coolgardie.

Yarmany has a favourable geological setting with key similarities to major lithium deposits of the Kalgoorlie Terrane, including favourable host lithologies such as ultramafic rocks, multiphase granites and numerous pegmatites identified along the 50km strike length of the project.

The company recently raised $1.2m to accelerate exploration at Yarmany and Fraser South projects with a focus on lithium and nickel exploration at the former.

St George Mining (ASX:SGQ)

At its Mt Alexande project, St George’s drilling has uncovered an extensive mineralised pegmatite field at the Jailbreak prospect, which is also located on the Kalgoorlie Terrane.

To date, drilling in 2023 has confirmed multiple lithium-bearing pegmatites including numerous high-grade values with a peak value of 1.77%.

Lithium-bearing pegmatites have now been identified by drilling across a 2km strike of the pegmatite corridor with a further 13km-long part of the corridor yet to be tested by drilling.

More recently, drilling at the Manta prospect has intersected a very thick 102.8m zone of flat-lying and locally fractionated pegmatites which could be part of a large lithium deposit.

Western Yilgarn (ASX:WYX)

While much of its attention is focused on the hunt of Julimar-style mineralisation at its Julimar West project, Western Yilgarn also has the Bulga project that isn’t too far off from Kathleen Valley.

Like Julimar West, the company’s efforts at Bulga are focused on nickel, but it also has the potential to host lithium-caesium-tantalum pegmatites within a 7km by 2km anomaly with coincident anomalous pathfinder elements.

At Stockhead we tell it like it is. While Future Battery Minerals, Metal Hawk, St George Mining and Western Yilgarn are Stockhead advertisers, they did not sponsor this article.