Liontown Resources announced on Friday that the cost of building its Kathleen Valley lithium project in Australia has exceeded expectations. As a result, the company plans to stockpile ore instead of selling it before the start of concentrate production due to weak market prices.
The revised estimate for the Kathleen Valley project now stands at AUD 951 million (USD 611 million), an increase from the previous estimate of AUD 895 million in January and AUD 473 million expected in 2021.
Liontown’s CEO, Tony Ottaviano, acknowledged the challenges posed by the current market conditions, stating that the company is operating in “one of the toughest markets to construct and operate seen in recent years.” In addition to the cost updates, Liontown also provided revised operating cost estimates.
To maximize future profitability, Liontown intends to retain the direct shipping ore (DSO) it initially planned to sell and add it to its stockpile for future processing. However, the company also noted that it has the option to sell this material if market conditions improve.
To secure the necessary funding for the completion of the project, Liontown is currently engaged in advanced discussions with a lender syndicate consisting of commercial banks and government credit agencies. Meanwhile, U.S. chemicals company Albemarle, which has expressed interest in acquiring Liontown, is progressing with its due diligence process and has been provided with the updated estimates for project capital cost and operating costs.
