Macquarie and Taylor Collison initiate on Liontown with price targets above $1

Lithium developer Liontown Resources (ASX: LTR) continues to attract attention from the bigger end of town, with two initiation reports since the start of July.
16th July 2021
Resources Rising Stars

Macquarie Research initiated coverage with an Outperform rating (see last week’s story in our FitzGerald column) and a $1.05 valuation, saying that the company’s flagship Kathleen Valley lithium-tantalum project in WA has the potential to produce ~700ktpa of spodumene, a scale large enough to underpin a fully integrated lithium hydroxide refinery.

“Kathleen Valley is one of the largest undeveloped spodumene resources globally and the largest not tied to off-take and joint venture agreements,” Macquarie said.

“We believe LTR will develop Kathleen Valley in stages with an initial 360ktpa spodumene project expanded downstream into hydroxide,” it says.

A Pre-Feasibility Study on the Kathleen Valley Project completed last year outlined a $325 million development delivering 350ktpa of spodumene production capacity over a 40-year mine life. A doubling of capacity is also being assessed as part of the study work, Macquarie notes.

“Our development scenario for Kathleen Valley broadly matches the PFS assumptions for Stage 1 with our base case incorporating a second stage that lifts total production to 700ktpa by 2029.

“We note that mining will occur via a combination of open pit and underground, which is unique for a Western Australian spodumene mine.”

Meanwhile, Taylor Collison has also issued its initiation report, with a Spec Buy recommendation and a risked valuation of $1.08 per share.

Taylor Collison says Liontown’s Kathleen Valley Project is a “tier-1” hard rock lithium asset in a highly ranked mining jurisdiction that is well served by transport and energy infrastructure.

Taylor Collison analyst Mark Gordon says studies indicate the potential to develop a robust operation, with the project also benefiting from “second-mover advantage” in the lithium sector.

“With no offtake arrangements in place as yet, Kathleen Valley has the flexibility regarding product sales and any financing structure required to take the project forward. The size of the resource also lend the project to scalability.”

Liontown this week announced a $52 million capital raising to accelerate the development of Kathleen Valley in light of the red-hot lithium market.

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