LTR -21.34%: The wild story of LTR printed another chapter today with banks stepping back from their $760m debt package that was stitched up last year to build the company’s Kathleen Valley lithium mine, conditions in the funding agreement around Lithium prices mean banks get to recut the size of the cheque they will write. As a result, LTR will scale back its ambitions of 3m-tonne-per-year from the Kathleen Valley mine set to start production this year, with the development work for the mine’s eventual 4m -tonne-per-year underground expansion now put on ice.
As we know, lithium prices have fallen off a cliff with the market now in surplus, and this is making financing new production a tough ask. As a refresher, Gina Rineheart owns 19.9% of LTR, having bought most of the holding at $3 a share, used as a blocking stake to scuttle Albemarle’s bid, the price now less than a 1/3rd of that in the space of 3 months. Ouch!
As is often the case though, the remedy for low prices is low prices themselves given it disincentives new production and ultimately prices stabilise – we’re starting to see this happen. While today’s announcement from LTR casts a shadow over the junior developers in the space, particularly those with big funding needs, these sorts of announcements are often indicative of a low point – here’s hoping!
We increased our Lithium exposure last week with the purchase of Pilbara Minerals (PLS) in the Active Growth Portfolio, with that call under pressure today, however, we still think the sector is ‘looking for a low’ and the turn, if/when it happens will be an aggressive one.
MM is bullish LTR <$1, it looks like a very interesting ‘punt’ at current levels
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