Liontown Resources is maintaining momentum on its way to kicking off construction of the world's next major hard rock lithium mine.
The company has its eyes firmly on the development of the A$473 million Kathleen Valley lithium mine near Leinster in Western Australia's Goldfields.
Fresh from completing a A$450 million capital raising in late 2021, Liontown has kicked off the year by awarding the $10 million contract for the semi-autogenous grinding mill to Metso Outotec.
The SAG mill is the first - and largest - long-lead item ordered for the project.
Liontown further de-risked the project last week by announcing the first lithium offtake agreement for Kathleen Valley.
South Korean battery manufacturer LG Energy Solution will take up to 150,000 dry metric tonnes of spodumene concentrate per year from 2024.
The deal represents about a third of Kathleen Valley's initial capacity of 500,000tpa.
Bell Potter Securities analyst Stuart Howe noted that the deal retained Liontown's independence and price upside.
"The contract's linkage to lithium hydroxide price indices preserves Liontown's value leverage to strong lithium markets and also enables Liontown to capture some of the margin traditionally held by spodumene to lithium hydroxide chemical converters," he said.
He added that Liontown was able to diversify its offtake arrangements across other geographies and participants in the lithium-ion battery supply chain.
Liontown is currently in talks with other potential "tier one" customers, as well as financiers to cover the remainder of project funding.
The company is progressing towards a final investment decision by the end of June.
Once at full production, Kathleen Valley is expected to represent 5.7% of the world lithium market and 4% of the market on a lithium carbonate equivalent (LCE) basis.
The initial 2.5 million tonne per annum Kathleen Valley mine has a post-tax net present value of $4.2 billion, an internal rate of return of 57% and payback period of 2.3 years.
Life-of-mine free cashflow is forecast at $12.2 billion.
A $66 million expansion to get to 4Mtpa is planned for year six of the operation, increasing output to 700,000tpa of spodumene, as well as up to 587t of tantalum.
Liontown is also studying the construction of an on-site 86,000tpa hydroxide plant.
The company has included input from the Tjiwarl Native Title Holders in planning to ensure that vital cultural and heritage considerations were been included in the fundamental design and layout of the project.
A mark of the strong relationship between Liontown and the Tjiwarl was the signing of a landmark native title agreement late last year.
ESG is core to Liontown's strategy and it is targeting net zero emissions by 2034. Kathleen Valley will be 60% powered by renewable energy from the start of operations.
Bell Potter's Howe has a speculative buy rating and $2.15 price target for Liontown, well above recent trading levels of around $1.70.
"Liontown is independent, debt-free with significant uncommitted offtake; a strong strategic position in a market for lithium facing supply shortages," he said.
"Key catalysts are awarding development contracts, procuring long lead-time equipment, signing offtake contracts and commencing development."
