At some point in 2023, Liontown Resources (ASX:LTR) had secured an investment of A$1. 13 billion to bring its Kathleen Valley spodumene mine in Western Australia into production.
However, as the lithium market slowed and demands weakened in late 2023, investment by banks and some government agencies, both foreign and local, fell to $760 million.
Then, in January, that package disappeared, and the company reached breaking point amid growing turmoil. A $3 per percentage offer from Albemarle was withdrawn after Gina Rinehart’s Hancock Prospecting blocked the offer with a raid on Liontown by percentage. Another financing agreement is needed to avoid bankruptcy.
In March, the company announced a $550 million line of credit with a syndicate of lenders, including Commonwealth Bank, National Australia Bank, Société Générale and Clean Energy Finance Corporation, to make the mine operational. Liontown said the $550 million deal has been executed and will be needed in the third quarter. However, on Tuesday, it revealed that the budget was not available and trading in the shares was halted until Liontown announced a new investment deal.
It appears that the new agreement amounts to $379 million ($250 million) with LG, the South Korean company, in particular with LG Energy Solutions, active globally in the battery, renewable energy and lithium sectors.
The agreement is a five-year plus five-year purchase contract: Liontown spodumene for money from LG Energy. In addition, there is an agreement to examine a lithium refinery in the long term, in addition to other agreements such as Pilbara Minerals’ examination with a Chinese buyer.
The deal will increase Liontown’s cash reserves to about $1 billion.
Liontown said the comprehensive agreement with LG “expands the main points of the terms agreed to in the binding term sheet announced on January 12, 2022 and specifies the operational and logistical needs for product delivery. “
The first five-year term is expected to start this year, with an option to extend for another five years.
LG Energy will acquire 100,000 dry metric tons (DMT) in the first year, expanding to 150,000 DMT year-over-year in the coming years. Prices will be decided using a formula-based mechanism that refers to market costs of battery-grade lithium hydroxide monohydrate.
Liontown said the agreement with LG Energy represents about a third of the initial capacity of up to 500,000 per year of spodumene concentrate.
The company is also finalizing a deal with Tesla for 150,000 tons of spodumene concentrate, or 60% of initial capacity.
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