Liontown books loss on convertible note deal despite lithium revenue and production surge in first half

Liontown’s considerable share price recovery dealt the lithium miner a big bottom line blow via a convertible note deal with South Korean battery manufacturer LG Energy Solution. The Tim Goyder-chaired miner on Thursday booked a loss of $184 million for the first half of the year, pinning the blame on a $104.4m non-cash impairment after Liontown’s share price jumped from 70¢ to $1.575 over the six-month period. It told investors the derivative charge would be a one-off after LGES last month turned its $US250m convertible note into a 7.5 per cent equity stake. Gina Rinehart-backed Liontown said its underlying net loss of $88.7m reflected $91.1m of depreciation and $21.2m of net finance costs against a production base at Kathleen Valley that was still in ramp-up phase. It produced 192,514 tonnes of 5 per cent grade lithium spodumene in the six months to the end of December, up 70 per cent on the same period a year earlier, and sold just under 190,000t across 10 shipments at an average realised price of $US888 on a SC6 grade basis — up 10 per cent. The improved price environment and higher production saw revenue more than double to $208m. WA lithium miners are looking to bring production back online and grow production as prices rebound from the dire lows of the past few years. Underlying earning were $8m in the red as the project continued to climb towards nameplate capacity. Operating costs of $985 per dry metric tonne and all-in costs of $1179/dmt both fell through the half. Managing director Tony Ottaviano said Kathleen Valley had now shifted to a fully underground operation, with an annual run-rate of one million tonnes. “The underground ramp-up is on track and we expect the second half to be materially stronger as volumes, recoveries, and pricing all continue to improve,” Mr Ottaviano said. He said the LGES charge and conversion to equity was part of a balance sheet “reset” and he expected a $58m gain to be recognised in the full-year accounts. “This provides us with a strong financial foundation to complete the ramp-up, progress the 4mtpa expansion study and continue to grow the company to its full potential,” he said. “We are one of a small number of producers globally that can bring additional lithium tonnes to market quickly through brownfield expansion of an operating asset. The expansion study is under way, and we are advancing critical path procurement now.” Liontown finished the half with $390m in cash. Its shares will open at $1.63, up more than 103 per cent in the past six months.