Liontown unveils $1.1bn mine-making funding package

Liontown Resources has bounced back from its failed takeover by lithium giant Albemarle, unveiling a $1.1 billion funding package to build its flagship Kathleen Valley lithium mine in Western Australia. 

The lithium project is eagerly awaited by world markets keen to move its downstream into electric vehicle batteries. 

Alternative debt funding 

Announcing the package after market close on Thursday, Liontown revealed it had secured a $760 million debt funding package from a syndicate of investors. 

The investors included Export Finance Australia, the Clean Energy Finance Corporation, domestic commercial banks, and government credit agencies. 

The package will replace the $300m debt facility Liontown has with motor vehicle giant manufacturer Ford Motor Company (NYSE:F). 

Liontown said the long-term funding had attractive commercial terms, factored in potential cost overruns, and allowed for working capital facilities. 

It estimates a cost of $951 million to start producing at Kathleen Valley, while other estimates have put the capital cost in the $1 billion mark. 

Institutional funding in the bag 

The company shared news on Friday of firm commitments for an institutional placement of about $365 million for some 302 million new fully paid ordinary shares.  

In addition, Liontown plans to make a non-underwritten conditional placement of 6 million shares to Chairman Timothy Goyder, alongside a shareholder raising of up to $45 million.  

All proceeds from the company’s equity raising and debt financing will be put towards refinancing the Ford and completing the construction and ramp-up of Liontown’s Kathleen Valley lithium project.  

The funds are tipped to provide the company with a prudent liquidity buffer that will allow it to maintain a robust balance sheet. 

Liontown Managing Director and CEO Tony Ottaviano was proud of the placement.  

“I am immensely proud that this funding has attracted such positive domestic and international investment and equity market support, which, in turn, demonstrates a strong vote of confidence in the Kathleen Valley project and the Liontown team,” he said. ‘Funded to first production’ 

Ottaviano said the funding package meant the company has the cash to build the mine and start production at the Goldfields site. 

He told the market the company had attracted high-calibre lenders, which spoke to the global importance of its project. 

“The execution of this credit approved term sheet and the launch of the equity raise are critical achievements in de-risking the development of the Kathleen Valley Project,” he said. 

“These initiatives ensure we are funded to first production and beyond.” 

Capital market raise 

Liontown hopes to raise $420.8 million from equity markets and investors in its unveiled funding package. 

It has firm commitments for $365 million and from institutional investors, pricing its new shares at $1.80 each. 

It hopes to settle the place on Tuesday and allot the shares on Wednesday, with help from joint lead managers UBS Securities and Bell Potter Securities. 

The company hopes to raise $45 million from eligible shareholders at a $1.80-a-share purchase price or a 2% discount to the 5-day volume-weighted closing price of the company’s shares, whichever price is lower. 

Liontown revealed all its board planned to respond to the offer by taking up their full entitlements. 

If shareholders agree at an upcoming annual meeting on November 30, a non-underwritten placement of 6 million shares will be made to the company’s chairman, Tim Goyder, to raise approximately $10.8 million.  

A failed takeover 

Liontown’s $6.6 billion sell-off to the world’s biggest lithium company Albemarle (NYSE:ALB) failed earlier this week, with the US company citing “complexities associated with executing the transaction” as the cause. 

In recent months, Liontown added second-generation mining magnate Gina Reinhart’s Hancock Prospecting investment vehicle to its share registry. 

Hancock has critiqued the company’s plan to start mining in the Goldfields, adding complexity to the planned sale of domestic lithium to a US company. 

Critical minerals efforts 

Like the US, Australia has its own critical minerals strategy to build long-term supply chains for critical minerals such as lithium on its shores. 

Australian Prime Minister Anthony Albanese supports regional supply markets, hoping the nation will mine and take its concentrate products downstream into batteries manufactured on local shores. 

The company’s share price was down 81 cents or 30.3% to $1.98 by mid-afternoon on Friday. 

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