Commodities | Mar 17 2026
This story features LIONTOWN LIMITED.
For more info SHARE ANALYSIS: LTR
The company is included in ASX200, ASX300 and ALL-ORDS
Liontown Resources’ interim result highlights scaling production with operational performance tracking ramp-up expectations.
- Liontown Resources’ interim result shows scaling production
- Operational performance in line with ramp-up expectations
- Underground transition, balance sheet strengthens
- Project expansion decision due in September quarter
By Mark Woodruff
Lithium demand remains resilient, UBS notes, despite softer electric vehicle data, supported by rapid growth in battery energy storage systems (BESS), where demand is expanding about 60% year-on-year.
Lithium plays a central role in BESS, enabling renewable electricity to be stored and released when needed, stabilising grids as the energy transition accelerates.
Hard-rock producers such as Liontown Resources ((LTR)) typically sell spodumene concentrate (SC6), an intermediate product rather than a direct battery input.
SC6 undergoes several chemical processing stages to produce lithium hydroxide and lithium carbonate, key inputs for battery cathode materials.
One such material is lithium iron phosphate (LFP), now the dominant chemistry in BESS applications.
Liontown’s Kathleen Valley operation produces high-quality SC6 with a lithium oxide (Li2O) content of approximately 6% to meet demand from global battery manufacturers.
Management noted limited exposure to the Middle East conflict as the Kathleen Valley site is powered around 80% by renewables, with diesel comprising just 4%-5% of the cost base.
Interim performance
The company last week reported first-half 2026 results ahead of consensus expectations, although timing factors played a role, with a $71m credit applied against operating costs for inventory adjustments, Jarden explains.
As the broker reverses the credit in its second-half FY26 estimate, the FY26 earnings forecast increases only around 1%.
Earnings and the underlying net loss after tax were heavily influenced by ramp-up costs and the shift to fully underground mining at the Kathleen Valley project in Western Australia’s Northern Goldfields.
Kathleen Valley has become the first large-scale spodumene-focused underground mine globally.
Kathleen Valley
In 2016, Liontown acquired the Kathleen Valley lithium project in Western Australia’s Northern Goldfields, which later became its flagship asset.
Throughout the late 2010s and early 2020s management advanced Kathleen Valley through exploration, feasibility studies, and project financing while securing offtake agreements with major battery and automotive companies such as Tesla, Ford, and LG Energy Solution.
The production ramp-up at Kathleen Valley commenced in July 2024, marking Liontown’s transition from a junior explorer to a lithium producer supplying the global battery supply chain.
Bell Potter highlights the operation as a highly strategic asset given its scale, long mine life and location within a tier-one mining jurisdiction.
Referring to the 4mtpa project expansion which is progressing to a final investment decision (FID) in the September quarter this year, Jarden points out Liontown is one of few global producers able to rapidly add brownfield supply.
Expansion study
Management has commenced a refresh of its 4mtpa expansion study for Kathleen Valley. The board is set to make a decision whether to proceed in the September quarter.
The proposed expansion aims to lift throughput above the current 2.8mtpa design capacity and is expected to be delivered through plant debottlenecking and access to additional underground stopes.
Citi estimates total growth capex of -$260m over 18 months to expand Kathleen Valley to 4mtpa, including -$100m for a new ball mill and two flotation tanks and -$160m for underground development.
Kathleen Valley is well positioned for a brownfield expansion, in Morgans’ view, supported by existing infrastructure, approvals and a substantial mining inventory already in place.
Given the spodumene market pricing recovery to above US$2,000/t, Macquarie stresses brownfield expansion opportunities such as Liontown’s proposed 4mtpa expansion at Kathleen Valley are returning to focus.
Balance Sheet
Morgans notes the balance sheet has strengthened materially following the company’s equity raise in August last year and the conversion of LG Energy Solution (LGES) convertible notes (announced in late January), reducing gearing to 22% from 48%.
LGES converted its US$250m convertible note and accrued interest into Liontown equity (rather than seek repayment), thereby removing $482m of liabilities from the balance sheet, Macquarie explains.
In addition, Morgans notes repayments on the Ford loan (principal and interest) were deferred to September this year, reducing funding risk during the Kathleen Valley ramp-up and through the 4Mtpa expansion study and final investment decision window.
As at December 31, 2025, Liontown reported cash of $390m. On a pro forma basis, and excluding leases, analysts estimate the company is in a net cash position of about $32m after the conversion.
Jarden forecasts a return to a strong net cash position of more than $200m at end FY26.
Given current lithium pricing strength, Bell Potter suggests Liontown is well positioned to generate cash quickly, supporting incremental production expansions and potential shareholder returns.
Costs and recoveries
An underlying earnings loss of -$8m beat consensus expectations of a -$25m loss, while the underlying net loss after tax of -$89m proved 31% better than consensus, partly driven by a lower-than-expected tax expense.
Revenue of $207m rose 107% year-on-year and was broadly in line with the market forecast, given both revenue and cash flow had already been disclosed in the December-quarter production report.
Management maintained FY26 production guidance for Kathleen Valley of 365kt-450kt, expecting the operation to reach a run rate of 1.5mtpa of spodumene concentrate by the end of the March quarter, increasing to a run rate of 2.8mtpa by the end of the June quarter of 2027.
Management expects unit costs to decline to -$855–$1,045/tonne on a 5.2% lithium oxide basis (SC5.2), compared with a consensus forecast of -$913/tonne.
Ord Minnett’s expectation is for unit cost of -$934/tonne.
The reduction is anticipated as underground mining contributes the majority of ore by the end of FY26, replacing the current reliance on open-pit material.
Recoveries improved to average 61% in the period as the plant worked through the planned feed transition, Macquarie explains.
Liontown also expects recovery rates to stabilise at around 70% once underground ore becomes the primary feedstock.
Outlook
Morgans has upgraded its rating for Liontown to Hold from Trim, suggesting the stock is trading around fair value following share price weakness over the past month.
The share price has declined from circa $2.20 in January to around $1.55 at the of writing.
Operational performance continues to track in line with ramp-up expectations, while the balance sheet should strengthen under current lithium prices, the broker suggests.
Ord Minnett has raised its rating to Accumulate from Hold, equally on valuation grounds. (On this broker’s tiered rating system, Accumulate sits in between Buy and Hold).
Citi notes Liontown’s implied SC6 price of US$1,600/t is in line with peers. This broker’s target price is reduced by -3% to $1.65 per share, with the rating upgraded to Neutral from Sell.
Buy-rated Bell Potter anticipates a stronger second half, supported by a higher proportion of clean underground ore, which should improve plant recoveries and lift production volumes from the 1H FY26 level, alongside materially stronger lithium prices.
While Jarden continues to hold Liontown in high regard for its strong project delivery and early operating performance at Kathleen Valley, this broker maintains “valuation discipline” by retaining an Underweight rating (soft Sell-equivalent) while awaiting a more attractive entry point.
Key risks to this view include renewed strength in lithium prices and a resurgence of corporate activity across the sector.
There are six daily monitored brokers in the FNArena database that research Liontown Resources.
Bell Potter and UBS have Buy ratings.
Assessing fair value after recent share price weakness, Morgans and Citi both upgraded their ratings to join Macquarie on Hold, while Ord Minnett upgraded to Accumulate.
Outside of daily coverage, Jarden remains with its Underweight rating (between Hold and Sell) and 62 cent 12-month target price.
Jarden’s target contrasts with a range between Citi’s $1.65 and Bell Potter’s $2.42 in the FNArena database. The average target of $1.94 is barely changed from the pre-result level.
In UBS’s bear case for lithium, Chinese supply disruption could resolve quicker than anticipated.
Additional supply additions out of opaque regions such as Africa and China also have potential to displace western supply.
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