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Monsters of Rock: Liontown back in business with $550m debt facility
Mining
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- Liontown Resources shares surge after Kathleen Valley owner nabs $550m debt package
- Core Lithium sinks after CEO exit and big half year loss
- Jupiter Mines preps PFS on battery grade manganese
Is this a sign the worst of the negative sentiment in lithium is over?
Liontown Resources (ASX:LTR) has announced a downsized $550m debt facility to replace a $760m package pulled by a consortium of lenders which included Australia’s big banks.
Part of a cavalcade of bad news paraded out of Australia’s mid-tier lithium stocks as spodumene prices dived to US$850/t in early 2024, the decision from the lenders to can the facility led to animosity against forecaster WoodMac from within the sector after a sharp downward revision in its forward prices that suggested lithium units would be oversupplied until late this decade spooked the debt providers.
Commonwealth Bank, NAB and Societe Generale have returned to make up the consortium’s commercial component, with Australia’s export credit agency Export Finance Australia as well as the Clean Energy Finance Corporation still on board.
CEFC is a notable inclusion given the role it played backing Pilbara Minerals (ASX:PLS) and its Pilgangoora mine in the earliest stages of WA’s lithium boom.
LTR says the funding, which will partly be used to refinance a loan facility from Ford, will not need to be drawn down until the third quarter of this calendar year.
The ~500,000tpa mine was on track to expand from an initial mining and milling capacity of 3Mtpa to 4Mtpa with the original debt facilities after opening in mid-2024.
Gina Rinehart-backed Liontown’s ambitions have been stunted by the falling spodumene price, with the future supplier to Tesla, Ford and LG saying a review on the opex and capex requirements of the expansion will be available to the market next quarter.
As part of the funding, which matures by the end of October next year, LTR will need to deliver an updated mine plan and financial model by July 31 :
“…based off amongst other things, independent price forecasts and
forecasts of production and capital and operating costs approved by an
independent technical expert, and which demonstrates the Project is
sufficiently funded for the term of the Debt Facility and has the capacity to
support a subsequent long term financing package.”
LTR MD Tony Ottaviano, whose company saw a $6.6 billion takeover offer from Albemarle scuppered by the interloping Hancock Prospecting last year, said the debt funding provided “strong endorsement for our project and a platform of financial certainty from which to move forward.”
Liontown shares rose as much as 14% this morning to $1.50 — down around 11% YTD but 66% up on its 2024 lows of 90c hit on February 6.
Liontown Resources (ASX:LTR) share price today
Core under the cover of darkness
Core Lithium (ASX:CXO) shares on the other hand are down almost 7% this morning after the NT lithium miner announced the resignation of CEO Gareth Manderson and lodged its financial results under the cover of darkness yesterday.
Well, almost an hour after the end of the day’s trade at least.
Core, which halted mining at its Grants pit at the NT-based Finniss lithium project in January and suspended an underground expansion, reported a net loss after tax of $167.6m for the half year.
That was impacted not just due to thinning cash flows on a 75% slide in the spodumene price but also a $119.6m cash impairment on the value of Finniss and a $27.6m provision for ‘onerous contracts’.
EBITDA was -$11.5m, with operating cash flow $54.8m in the red.
Core finished the half with $124.8m in the bank after selling 54,100t of spodumene concentrate and 46,300t of lithium fines for $134.8m in revenue.
It is currently drawing on a 289,000t ore stockpile from previous mining at Grants, with 90,000-95,000t of 4.77% Li2O concentrate to be produced in FY24 for sales of 80,000-90,000t, well below a 175,000tpa run rate contained in initial studies.
The pause of mining has led to the departure of former Rio executive Gareth Manderson as CXO boss, to be replaced in the interim by CFO Doug Warden.
Chair Greg English credited Manderson with turning around the performance of the Finniss mine, with Manderson noting its success in improving recovery rates.
But in saying the lithium market still has strong potential, Manderson also acknowledged the market dynamics had shifted after prices collapsed from over US$8000/t in late 2022 to under US$1000/t in early 2024. Fastmarkets has seen spodumene prices (6% Li2O basis) recover to US$975/t in recent weeks after around a month at an apparent floor of US$850/t.
Jarden analysts Jon Bishop, Ben Lyons and Adam Bennett, who have a sell rating and 15c price target on Core, say they still view the Finniss project’s economics as ‘optimistic’.
“And thus we view – in light of the aforementioned risks to the long-term viability of the Finniss lithium project – possible contractual ‘calls’ in the event that CXO is unable to deliver and therefore provide appropriate remedy for its supply obligations, the as yet unresolved Tesla (possible) legal claim and projected cash burn, that the current $470m market capitalisation or $360m EV as untenable. Sell retained,” they said in a note this morning.
Core Lithium (ASX:CXO) share price today
Jupiter Mines to start battery manganese PFS
Jupiter Mines (ASX:JMS), half owner of the Tshipi manganese mine in South Africa, says it will begin a US$2.9m PFS on a battery manganese plant this month.
It comes after a scoping study, which suggested the miner could become a major non-Chinese supplier of the high purity manganese sulphate or HPMSM used in both NCM and LMFP battery cathodes, brought positive results.
JMS says it would operate a 50,000tpa plant for three years before increasing in scale to 100,000tpa from 2030, delivering a post tax IRR of 25% and US$179m in EBITDA per annum, with capex for the final stage of the project expected to be in line with other advanced projects at an estimated US$430m.
Jupiter Mines (ASX:JMS) share price today
The broader materials and energy sectors were both in the red by around 0.5%, as gold prices fell for the first time in almost two weeks overnight, with LBMA prices off around 0.9% to US$2161.25/oz.
It came after figures showed US inflation rose 3.2% YoY in February, up from 3.1% a month earlier, with prices in the world’s biggest economy up 0.4% on January.
That will chill hopes for an early start to rate cuts from the US Fed, a key trigger for higher gold prices.
