LTR announced yesterday a $US250m funding deal and 10-year offtake extension from foundational partner, LG Energy Solution which underpins the ramp-up of their Kathleen Valley Lithium project, which is on schedule and on budget to first production by end of July. The package will replace the A$550mn debt facility announced in March, and gives them more flexibility and better structured financing to withstand the weakness in Lithium prices. The five-year Convertible Notes were issued at a conversion price of $1.80 per share, paying a low coupon (equal to the SOFR). As a guide, if the notes were converted today, it would equate to about an 8% shareholding in LTR.
The funds provide the needed capital to fund Kathleen Valley ramp-up to 3Mtpa, and is a positive announcement at a time when Lithium is struggling around the globe. About A$120mn will be spent for capital costs to complete construction and commissioning, leaving LTR with ~$380 million of additional liquidity. They’ll use some of it to keep their options open for a potential ramp-up to 4Mtpa by 2027, as had been planned.
While it’s an understatement to say Lithium remains in the ‘naughty corner’, this is positive news for LTR. It gives them the type of capital they need to progress with the project in the immediate term without the more structured conditions of their previous debt package. They can also keep their options open to ramp up volumes in the coming years if/when things improve.
- We view the deal as a positive, though we concede that Lithium is a very tough space right now.
MM remains cautiously bullish on LTR <$1.00, though it's high risk
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