Australia-listed lithium developer Liontown Resources announced Monday it has started a review of the planned expansion of its Kathleen Valley lithium project in Western Australia, citing low lithium prices.

“The recent material decline in spodumene prices has triggered significant reductions in short and medium-term lithium price forecasts,” the company said in a statement seen by Kallanish. “As a result, the company has commenced a review of the planned expansion and associated ramp-up of Kathleen Valley to preserve capital and reduce the near-term funding requirements of the project.”

The review would involve examining options to defer the timing of the 4 million tonne/year underground development work, sequencing adjustments to the mine plan, and scope for additional cost optimisations. However, there would be no changes to the 3m t/y plant capacity design currently under construction.

Liontown’s ceo Tony Ottaviano said in a teleconference that the spot spodumene concentrate price for the 2027-2029 period will be “very low” at around $950/tonne cif. The forecast provided by Wood Mackenzie reflects a 60% downgrade from their previous outlook forecast, based on the assumption of increased supply. This includes African supply, China lepidolite supply and brownfield expansions underway in Western Australia, the executive explained.

The company reiterated that the project is on track for the first production in mid-2024, with Liontown focused on delivering it to “schedule and on budget.” It is expected to produce 500,000 t/y of spodumene concentrate in the first five years. 

Additionally, the company has scrapped an AUD 760 million ($500.8m) debt facility planned last October, for a smaller debt facility.

“The finalisation of the debt package has been impacted by recent reductions in the independent forecast pricing for spodumene upon which the lenders’ credit approvals were based,” Liontown says. “Accordingly, the company has now commenced discussions on a revised, smaller debt facility that will reflect the project review.”

The lithium developer claims that the lenders remain “highly supportive” of the project. Liontown had around AUD 515m cash at the bank on 31 December 2023, having now fully drawn the AUD 300m project funding package secured from Ford. The latter is anticipated to cover construction activities spending till first production this year.

US lithium giant Albemarle is said to have started divesting its 4% stake in Liontown, following a failed attempt to acquire the company earlier last year.