A $545 million lithium mine in Western Australia has been approved for development after its owners, ASX-listed Liontown Resources, signed a deal today with US giant Ford Motor Company to supply the battery metal and back the project with a massive loan.
Key points:
- The Kathleen Valley lithium mine, 680km north-east of Perth, is targeting first production in 2024
- The mine owners have locked in offtake deals with car manufacturers Ford and Tesla and battery maker LG Energy Solution
- The cost of construction has blown out from original estimates of $473 million last year to $545 million
The green light for the Kathleen Valley mine, 60km north of Leinster in WA’s Goldfields, follows last year’s approval for the $1.9 billion Mt Holland lithium mine near Southern Cross and a refinery at Kwinana.
Today’s deal between Perth-based Liontown and Michigan-headquartered Ford is for the annual supply of up to 150,000 dry metric tonnes of spodumene concentrate for five years, starting from 2024.
It follows similar transactions with Elon Musk’s Tesla and South Korean battery maker LG Energy Solution.
As part of the deal, Ford will provide Liontown with a $300 million loan to fund the project’s development.
The company raised $450 million last year, so is well funded to cover the construction costs, despite a $72 million blowout on initial estimates to $545 million.
‘Globally relevant’ lithium mine
In a statement to the ASX, Liontown’s managing director Tony Ottaviano described the final investment decision by the board as just the beginning, and said the “central task lies ahead” to safely build and commission the mine.
“The signing of our third and final foundational offtake agreement is a momentous milestone for Liontown and the Kathleen Valley project, with approximately 90 per cent of Kathleen Valley’s start-up capacity now under secured long-term binding offtake agreements,” he said.
“Our disciplined approach to our offtake strategy has enabled us to build a customer base of tier-one, globally significant customers in the electric vehicle battery supply chain, validating Kathleen Valley’s status as a globally relevant lithium asset.
“In addition to the offtake, the $300 million funding facility from Ford, together with the capital raised last year, means that we have secured commitments for the funds required to support the full commercial development of Kathleen Valley through to first production.”
Ford’s vice president of electric vehicle industrialisation, Lisa Drake, said it was a significant deal for the car maker.
“Ford continues working to source more deeply into the battery supply chain to meet our goals of delivering more than two million electric vehicles annually for our customers by 2026,” she said.
WA lithium production on the rise
Liontown told the ASX it had already placed orders for 73 per cent of long-lead items for the processing plant, worth an estimated $83 million.
Mining is expected to begin early next year to build up stockpiles of ore ahead of the commissioning phase.
Kathleen Valley is forecast to produce about 500,000 tonnes of spodumene concentrate a year, with plans to expand to 700,000 tonnes in 2029.
It will add to WA’s growing number of lithium mines in production, which already includes the Greenbushes mine in the South West, the Pilgangoora and Wodgina mines in the Pilbara, Mt Cattlin near Ravensthorpe in the Great Southern, and the Mt Marion and Bald Hill mines in the Goldfields.
Mt Holland — a 50:50 joint venture between Wesfarmers and Chile’s SQM — is due to begin production in the second half of 2024.
