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Speaking in a recent interview, Tony Ottaviano said the Perth, Australia-headquartered company didn’t plan to remain a single-asset company.
“We’re not done yet with Kathleen Valley – there’s a bit of work to be done there to finish the ramp up and then get it into steady state. The resource has not been drilled out, so there’s more to be done to see where we can go in terms of organic growth around Kathleen Valley,” he said.
“But we don’t want to stay a single-asset company, so as a board, we did a strategy review and we’d like to think that, especially in the current market, there may be opportunities,” he added.
According to Ottaviano, these opportunities could be in the form of further exploration success; a partnership with another company to acquire an asset near production; or even participating in brines.
“We’re open to exploration [of opportunities] because we want to diversify our earnings away from just Kathleen Valley,” he said.
Liontown produced its first spodumene concentrate at Kathleen Valley in mid-2024. Since then, it has produced more than 117,000 tonnes of concentrate and shipped 92,000 tonnes, stockpiling the difference for the mill ahead of a planned underground transition. The mill has achieved a targeted run rate of 2.4 million tonnes per year.
“It was a great effort by the team to deliver on time, which is very rare in construction projects of this size and especially having to contend with a post-Covid global market which had supply chain and resourcing issues,” he noted.
The company originally said the Kathleen Valley plant will have a mining capacity of 3 million tonnes per year of ore by the end of the first quarter. An expansion would then eventually increase this capacity to 4 million tonnes per year, a move which is expected to yield about 700,000 tonnes per year of spodumene concentrate, the refined product derived from the ore.
But weaker lithium market conditions led the company to rethink its timeframe for the ramp-up and expansion.
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 $725 per tonne in September 2024.
“In November last year, we had to do a reset of the strategy of the business, given lithium market conditions. One of the key elements of that reset was that we were going to slow the ramp up and defer the expansion to 4 million tonnes, because we simply weren’t going to put more tonnes into an oversupplied market,” Ottaviano told Fastmarkets.
Ottaviano said that the optionality to ramp up to 3 million tonnes and expand further is still there.
“We need to decide, as a board, what the right market conditions would be for expansion. If those market conditions present themselves and are, in our view, sustainable – because we don’t want the market to peak, commit to the expansion, and find the price drops again – then we will commit to it,” he noted, adding: “It would take about 18 months after that decision to actually put the expansion in place.”
Key signals the company is eyeing include inventory levels, demand, how much supply is coming on, and which projects are in the development phase, Ottaviano noted.
“We’re starting to see the signals, which will mark a significant turning point. It’s not so much the price — it’s the foundations that potentially indicate that ultimately, prices will turn,” he said.
The transition to underground mining is expected to be completed in early 2027 or maybe slightly sooner, he added.
According to Ottaviano, in addition to being one of the pioneers of underground mining in lithium, the transition will give Liontown a competitive advantage on three fronts: access to clean ore, improved fragmentation, and immediate access to higher grades.
“We’re going for higher margin material, whether higher or lower grade,” he added, noting that the strategy is to adjust supply volumes to maximize margins over volume.
“The typical tendency of a mining company is to push out the volume as much as it can, because the more volume you put out over the same fixed cost base, you reduce your unit cost. But in our case, to get that increased volume, we have to pay an upfront deposit,” he said.
Liontown has instead opted to preserve cash by reducing volumes, Otaviano said.
“It’s more beneficial than spending cash and hoping that we generate more revenue into an oversupplied market. So let’s preserve the cash as opposed to pushing the extra tonnes to get lower unit costs,” he added.
South Korean-based LG Energy Solution (LGES), and car manufacturers Tesla and Ford, are all foundation customers for the spodumene concentrate produced at Kathleen Valley from mid-2024.
Initially all contracts were made for five years, but LGES and Liontown recently formed a strategic partnership, which extends the offtake agreement for an additional ten years. The contract with Ford also includes an option to extend the agreement for a further five years by mutual agreement.
Around 90% of Liontown’s production is in long-term contracts, although this could change in the future to allow more in the spot market, Ottaviano said.
“When Liontown initially signed its offtake agreements, the market was completely different, with very limited liquidity in the spot market. With the passage of time, that market has grown,” he noted. “So potentially in the future we may rely on the spot market as a preference on chemicals, rather than some of the indices,” he added.
Now the company is in production it is starting to explore options in physical pricing, he said.
“We’ve got a couple of spot cargoes coming up and we might trial a few things. We’re still very much committed to the concept,” Ottaviano added.
Ottaviano said that part of the assessment is whether it makes sense to go into refining at all. According to Ottaviano, conventional wisdom in the mining sector is to stop at the point of the first sellable product, because that is where the highest margin should reside.
“We’re still prosecuting this, but all the partners recognize that the economics have to compete with China. If we can’t compete with China, there’s no point doing it,” Ottaviano told Fastmarkets.
“We would probably be in a position to make the decision within the next 18 months. But there’s another overlaying factor here: if the world is serious about EV [electric vehicles] and diversification of supply chain, then we have to make these western supply chains work and compete,” he said.
The end result would likely focus on carbonate, not hydroxide, Ottaviano noted. Lithium producers prefer lithium carbonate production as it is used in the production of lithium iron phosphate (LFP) batteries while hydroxide is used in nickel cobalt battery chemistries.
“At the moment, hydroxide looks tough. The Chinese will also put hydroxide in LFP batteries as well, but their preference is carbonate,” he said.
“A lot of hydroxide refineries have added carbonate back ends, and therefore they can take spodumene and produce carbonate. Once upon a time this was not as cost effective as brine to carbonate — now it is. So we continue to be interested, we continue to prosecute the financials, but there are some challenges,” he added.
Ottaviano said that the reason Liontown chose customers that are at or close to the end of the battery value chain is because they’re the ones that are ultimately going to determine battery chemistries and the company wanted to be agile to react.
“At the moment, the LFP and the hybrids of LFP seem to be the dominant chemistry and potentially will remain so for a little while,” he told Fastmarkets.
“I think there will be a place for the NCM]s [nickel cobalt manganese batteries] in the high-performance vehicles, where people aren’t cost conscious, but they want the performance. But will NCM be a dominant chemistry? It’s tough to see at the moment,” he added.
Ottaviano said that while there has been work on alternatives such as solid-state batteries, development is still some way off. He remained unconvinced on the prospects for sodium ion batteries, but was optimistic on the outlook for the use of lithium in batteries for energy storage systems (ESS), noting that some market participants are forecasting than the stationary battery market could even be bigger than batteries for electric vehicles.
“The technology that’s developed in the whole control systems behind the big battery farms is now of such a quality that it doesn’t matter what’s driving the power source, whether it’s fossil fuel, nuclear, coal, oil, gas — a lot of them will have battery augmentation, because of its ability to buffer the grid,” he said.
“There are of course other battery chemistries. But if demand is as significant as people are saying, there’ll be room in the bed for everybody,” he added.
Recycling is meanwhile an interesting potential sector for Liontown, he said, with a partnership in this area also a possibility.
“It’s very early days, but recycling provides opportunities on a whole range of commodities. It’s effectively a different form of mining,” he noted.
“Recycling will be a form of the supply curve,” he said. “It may not work out, but we need to be alive to it. We would look at a partnership,” he added.
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.