Bridge Street Capital bumps up Liontown valuation to 21 cents

Sydney-based Bridge Street Capital has increased its valuation for lithium developer Liontown Resources
19th June 2020
Resources Rising Stars

Sydney-based Bridge Street Capital has increased its valuation for lithium developer Liontown Resources (ASX: LTR) from 17c to 21c after incorporating inputs from the company’s latest development update on its flagship Kathleen Valley lithium-tantalum project in WA.

Liontown provided what Bridge Street describe as a “very encouraging” update last week on the progress of its updated Pre-Feasibility Study (PFS), which will be based on the successful exploration effort over the past six months which has seen the Kathleen Valley resource expand to 156Mt at 1.4% Li2O, one of the largest deposits globally.

“Importantly, this programme identified a high-grade ‘purple patch’ which seems likely to allow preferential processing of the higher grade ore in earlier years,” wrote veteran Bridge Street analyst and former fund manager, Dr Chris Baker.

Key inputs to the revised PFS, now due in Q4 2020, include early scheduling of a deeper high-grade resource accessed by a shallow underground, the use of whole ore flotation for the concentration of spodumene and production of by-product tantalum which may deliver 5-10% additional revenues.

“We have incorporated these inputs into our conceptual KV valuation model and – with no change to our long term A$ spodumene concentrate price assumptions – have seen our C1 cost estimates drop by around 10% to around US$4800/tonne (LCE basis) and our project NPV expand by around 19% to A$481 million,” Baker said.

“Kathleen Valley remains one of the most encouraging pre-development lithium projects in WA,” Bridge Street Capital conclude as part of their investment view in the detailed report.

“The final resource upgrade is now complete, and investors can now look forward to the completion of a revised PFS in 4Q20 and the bankable feasibility study, likely to commence in 2021.”

Baker sees the potential for a possible 10-year underground mine life helping to drive run-of-mine grades from his earlier assumptions of around 1.2% Li2O to around 1.5%, bringing forward significant revenue.

“Significant advances have been made in the metallurgical flowsheet, including the incorporation of a whole ore flotation circuit enabling the recovery of tantalum as a by-product,” he said.

“Collectively, these outcomes have the potential to drive down cash costs by as much as 10% (based on our estimates. This is vital, in our view. KV needs to sit in the bottom half of the cost curve to be globally competitive.”

In the meanwhile, the company has the possibility of delivering a significant nickel-copper-PGE deposit from exploration at its recently announced Moora project in WA, Bridge Street say.

“It’s far too early to speculate on what might or might not be at Moora, located within a new metallogenic terrain in WA. Here, we should not lose sight of the price, where Julimar has already delivered a +$300m market capitalisation to discovered Chalice.”

To read the full Bridge Street report on Liontown, click here.



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