Liontown has set a quarterly record for underground development at Kathleen Valley while approving a $389 million expansion designed to lift steady-state concentrate production from FY30. The ramp-up is progressing, but lower plant feed, weaker recovery and higher unit costs show the transition is not yet frictionless.
- Record 4,021 metres of underground development in Q1 FY27
- Kathleen Valley expansion targets average production of about 780,000 dmt a year from FY30
- $502.1 million cash balance after a $58.2 million net cash outflow
- 77,982 dmt of spodumene concentrate produced and 82,561 dmt sold
- Centenario farm-in adds a staged lithium brine growth option in Argentina
Underground development reaches a quarterly record
Liontown Limited (ASX:LTR) has reached a new high in underground development at Kathleen Valley, advancing 4,021 metres during the September quarter. That was 21% above the June quarter and is intended to open the mining fronts needed to lift the operation from an annualised mining rate of about 1.6 million tonnes to approximately 1.9 million tonnes in the December quarter, before reaching the 2.8 million tonne target by the end of FY27.
The result strengthens the operational case behind Liontown’s Kathleen Valley expansion approval announced in September, which targets average steady-state spodumene concentrate production of about 780,000 dry metric tonnes a year from FY30. The approved project is expected to raise underground mining capacity to about 4.1 million tonnes a year and processing capacity to 4.2 million tonnes.
Production fell as the plant followed the mine ramp-up
Kathleen Valley produced 77,982 dmt of spodumene concentrate from 508,143 tonnes of ore processed. Production was down from 103,111 dmt in the June quarter as Liontown matched plant feed to the underground mining rate while drawing down open-pit stockpiles. Those stockpiles fell from 239,000 tonnes to 81,000 tonnes, while feed grade averaged 1.3% Li2O and recovery declined to 60% from 63%.
The company said the lower recovery reflected contamination and variable quality in the remaining open-pit stockpile, with limited blending material available. Plant availability nevertheless reached a record 94%. Liontown expects FY27 production to remain within guidance as underground output builds through the rest of the year, although the quarter's unit operating cost rose to A$1,259 per dmt sold, above the full-year guidance range of A$1,050 to A$1,250.
Expansion commits $389 million to Kathleen Valley
The expansion carries approved capital of A$389 million, including previously announced FY27 expenditure and contingency. Construction is scheduled for completion by the end of Q2 FY29, with first ore from Kathleen’s Corner Underground expected in Q1 FY28. Liontown said the new ball mill, primary ventilation fans and other long-lead equipment are progressing, while engineering, procurement and contractor mobilisation are underway.
The larger operation is targeted to reduce average steady-state operating costs to A$880 per dmt, with a stated range of A$840 to A$920, once fully ramped up from FY30. That target remains dependent on the mine reaching the planned scale, maintaining recoveries and delivering the construction schedule. The expansion tonnes are also not described in this filing as covered by new offtake commitments.
Cash remains substantial as investment accelerates
Liontown generated A$46.6 million of operating cash flow after receiving A$193.1 million from customers, and ended the quarter with A$502.1 million in cash. Net cash outflow was A$58.2 million, including A$81.7 million of investing outflows and A$23.2 million of debt repayments and related financing costs. Concentrate inventory stood at 16,223 dmt.
Sales totalled 82,561 dmt across five parcels, generating A$199 million of revenue. The average realised price was US$1,966 per dmt on an SC6-equivalent basis, up from US$1,880 in the June quarter, while one shipment moved into the December quarter because of planned maintenance and weather-related disruption at Geraldton port.
Argentina farm-in adds a second lithium development path
Liontown also completed the initial stage of its Centenario brine farm-in deal in Argentina, paying US$5 million in cash and US$10 million in Liontown shares for the farm-in rights. The staged agreement allows the company to earn up to 100% of the project by funding US$40 million of expenditure over four years, alongside milestone payments that could reach US$140 million if all conditions are met.
An initial US$15 million work programme over the next 12 to 24 months will include drilling targets identified by electromagnetic surveys. Liontown may earn an effective 49% interest after funding that programme, giving shareholders a new brine exposure while the much larger capital and execution task remains concentrated at Kathleen Valley.
Bottom Line?
Liontown has cash and operating momentum, but the next test is whether underground access can convert into higher production and lower unit costs before expansion spending gathers pace.
Questions in the middle?
- Can underground mining reach the planned 1.9 Mtpa step-up in Q2 FY27 without further pressure on recovery or unit costs?
- Will the $389 million expansion stay within budget and deliver first ore from Kathleen’s Corner in Q1 FY28?
- How much capital and management attention will the Centenario farm-in require before it produces a defined lithium resource?