Liontown shares rally despite downgrades
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The news: Shares in Liontown Resources rallied, tracking lithium stock gains, despite analysts making downgrades on the lithium miner after it unveiled a revised mine plan for its flagship Kathleen Valley project on Monday.
The numbers: Liontown shares were up 4.76% to 88 cents by 2:20pm AEDT, having closed 0.6% higher after the announcement.
Fellow lithium miners Pilbara (5.4%), Core Lithium, (2.5%), IGO (0.87%) and Arcadium Lithium (0.74%) also rallied.
On Monday, Liontown said it expects ore throughput at Kathleen Valley of 2.8 million tonnes per year from FY27, down from its previous forecast of 3 million tonnes.
Analysts made the following revisions after the update:
- Macquarie retained its 'underperform' rating but cut its target price 12% to 60 cents;
- Citi downgraded its rating from 'neutral' to 'sell' and reduced its target price from 85 cents to 75 cents;
- Bell Potter kept its 'buy' rating but lowered its valuation from $1.50 to $1.40; and
- Jarden stayed 'underweight' with a 68 cent target price.
The context: Macquarie analysts noted that Liontown is ramping up the Kathleen Valley project in a "challenging" lithium market, and the miner's balance sheet will continue to be a focus until the company can demonstrate positive free cash flow.
Bell Potter analysts said Liontown's full-year guidance "looks good" and broadly in line their estimates. However, they lowered their valuation on the miner due to the "marginally lower production profile" of Kathleen Valley, with a throughput rate around 7% lower than previously designed.
Citi downgraded Liontown based on its valuation, after the miner outperformed its peers by "10% to 20%" in the quarter to date.
What they said: "The real question is therefore: Will $100m in savings and an optimised mine plan to target higher grade ore as soon as practicable be enough for [Liontown] to both avoid a potential liquidity shortfall in the short term, and ensure a viable operation over the medium term assuming only modest recovery to lithium prices?" said Jarden analysts.
The sources: Macquarie research, Citi research, Bell Potter research, Jarden research
