Liontown scrapes debt together after lithium spooks lenders

Australia’s next aspiring lithium miner has shored up a chunk of funding it desperately needs to start producing the battery mineral within months, thanks in-part to a huge taxpayer-backed green loan.

Perth’s Liontown Resources revealed on Wednesday it had pulled together a renegotiated $550m debt package, just over a month after lenders behind a larger $760m funding pool arranged late last year pulled the pin amid tanking lithium prices.

The new debt plugs a huge funding gap for Liontown and its Kathleen Valley project in WA, and is hoped to take it through to first production, due mid-2024, and build up capacity to process three million tonnes of spodumene concentrate a year.

Seemingly unperturbed by lithium’s murky short-term outlook, Australia’s ‘green bank’, the Clean Energy Finance Corporation, has backed the project for $110m.

This is the biggest loan the Government-owned bank has made to the resources sector since being founded some 12 years ago.

“This important project has the potential to further shift the dynamics of lithium production in Australia,” CEFC executive director for WA and resources Rob Wilson said.

“Lithium is one of several key minerals that will underpin the global energy transition, and is becoming a major export earner for Australia.”

Another taxpayer-funded agency, Export Finance Australia, will lend $120m.

Two of Australia’s big four banks are on board with the project, Commonwealth Bank and the National Australia Bank, alongside France’s Societe Generale.

Westpac, ANZ and HSBC had been in the previously announced funding syndicate but are not part of the newly-agreed loan, which also comes with less flexible terms for Liontown this time round.

The miner is due to make its first lump sum payment in October 2025, by which time Liontown will be banking on lithium prices staging a comeback so it can make more money from spodumene concentrate sales.

Prices of lithium spodumene have regained some lost ground in recent weeks but are still languishing at just over $US1000 a tonne, compared with more than $US7500/t the same time last year, as the uptake of electric vehicles progresses slower than many anticipated.

Managing director Tony Ottaviano said the facility would provide a platform of financial certainty as the project heads towards first production.

“We are consequently well-positioned to deliver the remaining milestones to first production mid-year and ramp-up towards anticipated positive cashflows,” Mr Ottaviano said.

Money drawn will be used to refinance an existing $300m debt facility with automotive giant Ford, fund construction and ramp-up of the project and to provide working capital.

A fall in spodumene prices saw initial backers tear up their $760m agreement in January.

Liontown announced a project review to examine options to defer the timing of its 4mtpa underground development work, changes to the mine plan, and scope for “additional cost optimisations”.

The company is due to report the results of the review within the next three months.

Kathleen Valley was last estimated by Liontown to cost $951m to bring online.