Port Congestion and Transition Costs Challenge Liontown’s Near-Term Revenue
Liontown Resources reported a robust September quarter, doubling underground ore output and strengthening its balance sheet to $420 million. The company’s FY26 guidance confirms a strategic shift to underground mining with anticipated cost improvements.
- 105% increase in underground ore mined, achieving 1Mtpa run-rate
- Open pit mining on track for completion in December quarter
- Revenue of A$68 million impacted by port congestion and pricing
- Cash balance strengthened to A$420 million after equity raise and debt amendment
- FY26 guidance targets 70% lithia recovery and lower costs from FY27
Strong Operational Execution
Liontown Resources has delivered a solid September quarter, executing its transition strategy with precision. Underground ore mined surged by 105% compared to the prior quarter, reaching an annualised run-rate of 1 million tonnes per annum (Mtpa) in September, in line with the company’s operational plan. Meanwhile, open pit mining is progressing steadily, with the final clean ore zone exposed and completion expected in the December quarter, marking a pivotal shift to fully underground operations.
Financial Fortification Amid Market Challenges
Despite a 29% quarter-on-quarter revenue decline to A$68 million, largely due to port congestion and backward-looking pricing, Liontown’s financial position remains robust. The company’s cash balance soared to A$420 million following a successful equity placement and a strategic amendment to its Ford debt facility, which defers near-term repayments. This fortified balance sheet provides a strong buffer as the company navigates the underground ramp-up phase.
Cost Dynamics and Recovery Outlook
Unit operating costs rose 22% to A$1,093 per dry metric tonne sold, reflecting the planned drawdown of ore sorting product (OSP) stockpiles and lower recoveries during the transition. However, Liontown anticipates these costs will decline as higher-grade, clean underground ore becomes the dominant mill feed. The company maintains its FY26 recovery target of approximately 70% lithia recovery by March 2026, expecting progressive improvement as underground operations scale.
Strategic Market Positioning and Growth Potential
Liontown’s offtake agreements have been amended to provide greater flexibility, enabling the sale of additional tonnes into the spot market and the pursuit of new strategic partnerships. This flexibility aligns with the broader market outlook, where electric vehicle (EV) sales continue to accelerate globally, surpassing 2 million units monthly in September 2025. The company also highlights the growing importance of battery energy storage systems (BESS), which are forecasted to contribute significantly to lithium demand growth through 2029.
Looking Ahead
FY26 is framed as a transition year, with open pit mining concluding by December 2025 and underground operations ramping up to deliver improved productivity and lower costs. Liontown’s guidance anticipates sustaining capital expenditure of A$45–55 million and growth capital of A$55–70 million, with unit operating costs expected to trend lower from FY27 onwards. The company’s focus on operational optimisation, cost control, and market flexibility positions it well to unlock the full potential of the Kathleen Valley Project in the coming years.
Bottom Line?
Liontown’s disciplined execution and strengthened balance sheet set the stage for a cost-efficient underground future amid rising lithium demand.
Questions in the middle?
- How quickly will lithia recovery rates improve as underground ore feed dominates?
- What impact will ongoing port congestion have on sales volumes and revenue timing?
- How will Liontown leverage increased offtake flexibility to capture spot market opportunities?
