Few global lithium pre-development projects to rival Liontown, says Bridge Street

13th December 2019
Resources Rising Stars

Sydney-based Bridge Street Capital has updated its valuation for lithium developer Liontown Resources (ASX: LTR) to 17c/share – a steep premium to its current price of around 8c – following the recently released Pre-Feasibility Study for its Kathleen Valley lithium-tantalum project in WA.

“The Kathleen Valley Pre-Feasibility Study represents the next step in establishing full value for this emerging Tier-1 hard rock lithium project,” wrote Bridge Street resource analyst and former fund manager Dr Chris Baker.

“There are now few pre-development projects globally that can rival KV’s strength,” he wrote.

Baker says the PFS has delivered a positive outcome with the proposed mine life extended from the scoping study’s 9 years to a 26-year open pit.

“LTR’s headline NPV is $507 million with an IRR of 25%. Importantly, consultants Lycopodium have demonstrated that KV can produce a +6% spodumene concentrate employing a conventional crush/DMS/grind/WHIMS/flotation circuit,” he said.

“Capital costs are largely unchanged from the scoping study at $240 million. LOM unit costs are higher than the scoping study at US$406/tonne, driven by the exclusion of a tantalum by-product credit, partly offset by a lower LOM strip ratio.”

Baker values the company at 17c/share, based on the project NPV of $420 million, noting that the recent takeover of Kidman Resources by Wesfarmers is “more than supportive” of these estimates with a post-PFS value of 38c/share suggested.

"We can see ongoing consolidation of the lithium sector in WA,” Baker says. “With the completion of the PFS, LTR is now a prime target.”

“With the number of mines closures and curtailments – perfect evidence of the stress the industry is under – we believe we are at the bottom of the present commodity price cycle,” Baker added.


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