Liontown books $184m loss driven by convertible note deal, touts Kathleen Valley protection from Iran War

Liontown’s considerable share price recovery dealt it a big bottom line blow via a convertible note deal with South Korean battery manufacturer LG Energy Solution. The lithium miner on Thursday also revealed its growing reliance on renewable energy has so far shielded it from the impacts of soaring fuel costs stemming from the Iran War. “We are at 80 per cent renewable [energy] — that gives us a big, big advantage,” Liontown managing director Tony Ottaviano said. “On average, our total diesel cost is about four to five per cent of our overall cost base . . . not a significant amount.” Liontown booked a loss of $184 million for the first half of this financial year, mostly owing to a $104.4m non-cash impairment after its stock more than doubled over the six-month period. “The significant appreciation of Liontown’s share price to $1.575 at December 31 from 70¢ at June 30 and the reduction in the conversion price [of the LGES note] from $1.80 to $1.62 per option following the capital raising in August, were the primary drivers of an increase in the fair value of the derivative liability,” the company stated. The Tim Goyder-chaired Liontown said the derivative charge would be a one-off after LGES last month turned its $US250m convertible note into a 7.5 per cent equity stake — a stake that it offloaded not long after. Liontown tabled an underlying net loss of $88.7m, which included $91.1m of depreciation after the open pit mine at its Kathleen Valley operation was exhausted and mining moved fully underground. Underground mining is set to reach a commercial rate in the June quarter. Revenue rose from $100.4m to $207.5m after it produced 192,514 tonnes of 5.1 per cent grade spodumene concentrate for the six months ending December, up 70 per cent on the same period a year earlier. Liontown sold its product at an average realised price of $US888 a tonne on a 6 per cent grade basis. That SC6 benchmark price is currently more than twice as much following a recent lithium market rebound. Underlying earnings were $8m in the red as Kathleen Valley continued to climb towards nameplate capacity. Operating costs of $985 per dry metric tonne and all-in costs of $1179/dmt both fell through the half. Mr Ottaviano said Kathleen Valley had now shifted to a fully underground operation, with an annual run-rate of one million tonnes. “The underground ramp-up is on track and we expect the second half to be materially stronger as volumes, recoveries, and pricing all continue to improve,” Mr Ottaviano said. He said the LGES charge and conversion to equity was part of a balance sheet “reset” and he expected a $58m gain to be recognised in the full-year accounts. “This provides us with a strong financial foundation to complete the ramp-up, progress the 4mtpa expansion study and continue to grow the company to its full potential,” Mr Ottaviano said. “We are one of a small number of producers globally that can bring additional lithium tonnes to market quickly through brownfield expansion of an operating asset.” Liontown shares were down 2.9 per cent to $1.58 at 9.40am, which was in line with losses from its lithium peers.