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According to Tony Ottaviano, the updated work incorporates nearly two years of operating data from the Western Australian asset and evaluates alternative mine access routes made possible by the completion of open-pit mining.
“We’re refreshing the 4.0-million-tonne study with real operating data now, and we’ve created additional optionality,” Ottaviano told Fastmarkets in an interview on Friday February 27.
Perth, Australia-based Liontown commenced production at Kathleen Valley in April last year. The project has now fully transitioned to underground mining and is on track to reach a 1.5 million-tonnes-per-year run rate by the end of March.
All enabling underground infrastructure – including ventilation and paste fill – is now in place, with development rates and ground conditions tracking in line with feasibility assumptions, Ottaviano added.
“We’re getting the performance we expected from the equipment, and the rock conditions are consistent with our modeling,” he said. “By the end of March, we expect to be operating at a 1.5 million-tonnes-per-year run rate – around halfway to steady state.”
The company is targeting 2.8 million tonnes by the end of fiscal 2027.
Residual surface stockpiles and transitional ore are expected to be largely processed by the end of the current quarter. From that point, mill feed will increasingly reflect live underground stopping production rather than blended surface material.
“The remaining surface material will be largely processed by the end of the quarter,” Ottaviano said. “From there, underground production becomes the dominant feed source.”
When the expansion was originally contemplated during the 2022-23 lithium upswing, access to parts of the ore body was assumed to be from surface infrastructure.
With the open pit now completed and the operation fully underground, Ottaviano said Liontown is reassessing access from the base of the pit, a change that could reduce development capital and accelerate certain mining fronts.
The company is now reviewing the sequencing and capital intensity of its expansion plan, with a decision framework that differs materially from the earlier, more aggressive growth environment, he added.
Rather than executing a single step-change from 2.8 million tonnes per year to 4.0 million tonnes per year, Ottaviano said Liontown is examining a staged build-out that incrementally unlocks plant capacity as equipment is added.
“As we buy a piece of equipment, we increase throughput. That way, we don’t flood the market with a large amount of tonnes, and we smooth our cash flow. If market dynamics shift, we can pause,” he noted. “We don’t want to commit to expansion and then find the market turns. The staged approach gives us flexibility,” he added.
The approach reflects lessons from the lithium downturn of 2024-25, when rapid supply additions – particularly in conversion – collided with weaker-than-expected demand growth and drove prices sharply lower.
Fastmarkets’ spodumene, 6% Li2O min, spot price, cif China peaked at $8,287.50 per tonne in December 2022, amid strong demand and tight supply, before additional capacity and softening demand contributed to prices falling back to as low as $610 per tonne in June 2025. The market has since staged a recovery, with Fastmarkets’ daily assessment at $2,430-2,500 per tonne on Friday February 27, up from $1,985-2,100 per tonne a week earlier.
Liontown has not yet taken a final investment decision on the expansion case, but Ottaviano said that orders for certain long-lead items may be placed in advance of full approval, subject to board sign-off.
Execution risks now center on development rates and contractor performance in Western Australia’s tight labor market, particularly as gold sector activity remains strong.
“The WA market is active,” Ottaviano said. “We monitor workforce and equipment mobilization very closely. So far, we haven’t seen material disruption,” he added.
According to Ottaviano, Liontown intends to grow both organically and through disciplined acquisitions, reinforcing the company’s aim to move beyond a single-asset structure.
He said that the board has made clear the business will not remain solely reliant on Kathleen Valley and that any inorganic opportunities would be pursued in a value-accretive and disciplined manner.
Based on operating data to date, Ottaviano said Liontown expects Kathleen Valley to sit comfortably in the second quartile of the global lithium cost curve on a normalized basis across brine and hard-rock producers.
The positioning is significant in a post-boom environment where margin compression has exposed higher-cost producers.
Several operations globally curtailed output during the 2024-25 price trough, and downstream economics in Australia have come under pressure.
Most visibly, Albemarle curtailed operations at its Kemerton lithium hydroxide plant, highlighting the difficulty of competing with Chinese conversion costs in a low-price environment.
Liontown’s expansion sequencing is calibrated to avoid repeating the volume-first strategy that characterized parts of the previous cycle, Ottaviano noted.
He told Fastmarkets that expansion decisions will be anchored to structural demand signals rather than short-term price volatility.
“We look at inventories, what’s happening in the development pipeline, demand growth and whether market conditions are sustainable,” he said. “It’s not just about price – it’s about the foundations,” he added.
Market participants are closely tracking Chinese conversion margins, inventory levels and electric vehicle sales trends, alongside accelerating energy storage system deployment, as indicators of whether the market is transitioning from cyclical oversupply toward balance.
Ottaviano said Liontown’s assessment of lithium markets continues to focus less on short-term price moves and more on underlying structural indicators, particularly inventory flows and demand composition.
“We look at inventories, what’s happening through the supply chain, and whether the foundations are sustainable,” he said. “It’s not just about price – it’s about whether the market structure supports durable recovery.”
Although downstream integration remains under consideration for Liontown, Ottaviano was explicit about the economic challenge of building refining capacity in Australia.
Referring to industry estimates, he noted the cost gap versus China remains material.
“The cost competitiveness gap with China, both from an operating and capital cost perspective, is too big,” he said.
He cited commentary suggesting operating cost differentials of $5-8 a kilo in hydroxide production – a spread that, in a low-margin environment, significantly alters project economics.
Ottaviano also pointed to the structural advantages underpinning China’s refining ecosystem.
“What makes Chinese refiners so competitive is the ecosystem they have around,” he said. “They have ability to bring in labor readily. They have ability to dispose of the waste readily. And they have such scale in their industrial machine. They can just do things very, very effectively,” he told Fastmarkets.
He highlighted the commercial tension between policy ambitions and pricing reality in Western markets.
“The Western world wants a Western supply chain, but they want Chinese prices,” he said.
Ottaviano said a refinery option for Liontown is “not completely dead” but would require the right jurisdictional framework and potentially strategic partnerships to be viable.
The company has existing relationships with downstream partners, and alternative geographies remain under review, but no final investment decision has been taken.
In Hotter Commodities, special correspondent Andrea Hotter covers some of the biggest stories impacting the natural resources sector. Read more coverage on our dedicated Hotter Commodities page here.