Liontown Resources slides as Jarden cuts target price by 25%
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The news: Liontown Resources shares slumped on the ASX after Jarden slashed its target price on the lithium miner, concerned by low lithium prices and rising costs at its flagship Kathleen Valley operation in Western Australia.
The numbers: Liontown shares were down 4.6% to 78.8 cents by 1:30pm AEDT. The miner's shares closed 4.5% lower on Wednesday after posting its September quarter result.
Jarden retained its 'underweight' rating on the company and cut its target price from 90 cents to 68 cents.
The context: Jarden's analysts noted that a sustained lithium price recovery is "the single big risk" in the short-to-medium term. They expect that at current spot prices, Kathleen Valley will be loss-making at its steady-state stage, with operating breakeven not occurring until spodumene concentrate (SC6) prices exceed USD900 ($1,369) per dry metric tonne (dmt).
Meanwhile, the project would not generate sufficient free cash flow to retire its outstanding debt until prices exceed USD1,200 per dmt, according to Jarden's assumptions. Current spot prices sit around USD750 per dmt.
The analysts also noted that Kathleen Valley's first quarter of operations saw processing costs "well in excess" of their forecasts. While Liontown's commissioning is ahead of schedule, and its feasibility estimates are accretive to Jarden's valuation, the analysts forecast the need for additional working capital within the next 12 months.
The source: Jarden research
