Stock of the day: how Liontown might overcome lithium pricing hurdles
Liontown Resources aims to increase lithium production despite the sector facing fluctuating prices and evolving market sentiment.
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Stock of the day: Liontown (ASX: LTR)
Liontown Resources is on track to develop a battery chemical refinery and begin producing lithium by the end of this month. However, the company faces challenges from the fluctuating lithium prices. Currently, lithium prices have peaked at about $1,240 per tonne before dipping to just over $1,000 US dollars per tonne.
LG's backing of Liontown resources
Liontown Resources, an emerging player in the lithium market, has captured attention with a significant update. LG has committed to backing Liontown to the tune of 379 million Australian dollars via convertible notes that turn into equity at $1.80 per share. This five-year funding provides Liontown with the necessary capital to advance its Kathleen Valley project to a nameplate capacity of 3 million tonnes per year, with room to aim for 4 million tonnes.
Share price movement
Liontown's share price saw a significant bounce yesterday, even though the stock has fallen considerably this year, currently down around 1% in today's trade. Despite the favourable news, Liontown remains one of the most shorted stocks on the ASX, reflecting the broader challenges in the lithium sector.
Expert insights on lithium market sentiment
According to market experts, the lithium space has been challenging, with Liontown's recent announcement being one of the few bright spots in recent months. The company has had its share of corporate manoeuvring, including takeover interest from Arbemile and stake-building by Gina Rinehart. However, with lithium prices down, Liontown's performance reflects the broader trend in the sector.
Experts note that the lithium market has experienced euphoria and subsequent recalibration. Electric vehicle sales globally haven't met growth expectations, resulting in recalibrating supply and demand. Despite current challenges, there is optimism for a future bounce in lithium prices.
Comparisons with Pilbara Resources
When comparing Liontown with Pilbara Resources, Pilbara stands out as a better business with profitable operations, even at current lithium prices. Pilbara boasts over 1.5 billion dollars in cash on its balance sheet, making it a more favourable investment option. However, smaller players like Liontown could see significant movement if sentiment in the lithium sector improves.
In summarising Liontown Resources' prospects, experts suggest holding the stock for now, with potential interest in buying once market conditions stabilise. While challenges remain, the company's recent funding boost and production progress offer a positive outlook amidst a volatile market.
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