How Is Liontown Delivering Record Cash Flow Amid Lithium Price Slump?
Liontown Resources capped its first year at Kathleen Valley with over 300,000 tonnes of spodumene concentrate produced and a record $23 million in operating cash flow, despite a challenging lithium price environment. The company is on track to complete open pit mining by year-end and fully transition to underground operations by Q3 FY26.
- Third consecutive quarter of positive operating cash flow totaling $23 million
- Produced over 300,000 wet metric tonnes of spodumene concentrate in first 11 months
- Open pit mining on schedule for December 2025 completion
- Underground mining ramp-up progressing with key infrastructure commissioned
- Business optimisation program exceeds $112 million in cumulative cost savings
Strong First Year Performance Amid Price Pressures
Liontown Resources (ASX, LTR) has delivered a robust finish to its inaugural year of operations at the Kathleen Valley Lithium Operation, producing over 300,000 wet metric tonnes of spodumene concentrate in just 11 months. This milestone underscores the successful design and ramp-up of its fourth-generation process plant, which has maintained over 95% availability and consistent concentrate quality despite processing lower-grade ore blends.
In the June 2025 quarter, Liontown reported a record net positive operating cash flow of $23 million, marking its third consecutive quarter of positive cash generation. This achievement is particularly notable given a 9% quarter-on-quarter decline in average realised lithium prices, which fell to approximately US$740 per dry metric tonne of spodumene concentrate. The company’s disciplined capital management and operational flexibility have preserved a strong cash balance of $156 million heading into FY26.
Transition to Underground Mining on Track
Open pit mining at Kathleen Valley remains on schedule for completion by December 2025, with waste stripping focused on the Kathleen’s Corner pit and preparations underway to access the final major ore zone in the second quarter of FY26. Meanwhile, underground mining activities have advanced significantly, with production stoping commencing as planned in April 2025 at the Mt Mann orebody.
Underground operations have delivered encouraging early results, with fragmentation, dilution, and recovery metrics all exceeding expectations. The commissioning of Australia’s largest paste-fill plant and progress on ventilation infrastructure further support the ramp-up. Liontown aims to achieve 100% underground production and a 70% lithium recovery rate by Q3 FY26, positioning the company for improved ore quality and processing efficiency in the second half of the fiscal year.
Operational Efficiency and Cost Discipline
The company’s business optimisation program has surpassed its $100 million target, realising $112 million in cumulative cost savings and deferrals. Despite a 28% increase in unit operating costs to A$898 per dry metric tonne sold, largely due to ore sorting expenses and stockpile drawdown, all-in sustaining costs remained within guidance at A$1,227 per tonne.
Liontown’s process plant demonstrated flexibility by processing a higher proportion of low-grade ore with elevated gabbro content from strategic stockpiles, a temporary measure supporting the underground transition. While this impacted lithium recovery rates, the company expects improvements as higher-grade underground ore becomes the primary feed.
Financial Position and Market Outlook
Sales receipts for the quarter totaled $109 million, contributing to the strong cash position. Liontown also secured a $15 million interest-free loan from the Western Australian State Government under the Lithium Industry Support Program, further bolstering liquidity.
Looking ahead, FY26 guidance anticipates spodumene concentrate production between 365,000 and 450,000 tonnes, representing a 24% to 53% increase over FY25. Unit operating costs and sustaining capital expenditure are expected to remain elevated during the transition but will be managed carefully to preserve capital and operational readiness.
The company also disclosed an expected non-cash write-down of $75 million to $85 million on ore stockpiles due to lower lithium prices, a reflection of accounting policies rather than cash impact. Liontown continues to engage actively in sustainability initiatives and community partnerships, reinforcing its commitment to responsible mining practices.
Bottom Line?
As Liontown advances its underground ramp-up and navigates a volatile lithium market, FY26 will be a pivotal year to watch for operational execution and cost management.
Questions in the middle?
- How quickly will lithium recovery rates improve as underground ore production scales?
- What impact will the non-cash stockpile write-down have on investor sentiment and valuation?
- Can Liontown sustain positive operating cash flow if lithium prices remain subdued or decline further?