The Liontown Resources Ltd (ASX: LTR) share price has jumped 10% after the ASX lithium share revealed a new debt facility.
Liontown is working on its Kathleen Valley project. The company requires funding to get its project up and running.
New debt facility?
The company has a facility agreement for A$550 million with a syndicate of leading international and domestic commercial banks and government credit agencies.
This debt facility has been designed to ensure that the Kathleen Valley lithium project is funded through the first production and the ramp-up to the base case of 3mt per annum.
According to Liontown Resources, there are no scheduled repayments, and the interest is capitalised during the term of the debt facility, with a ‘bullet payment’ on maturity on 31 October 2025. There is a capitalisation sublimit up to A$40 million.
Proceeds drawn will be used to refinance existing Ford debt, fund construction and ramp-up of the project and to provide working capital and liquidity.
The company said Kathleen Valley remains “on schedule and budget” to commence its first production in the middle of the 2024 calendar year. Becoming operational is a key focus of investors looking at the Liontown share price.
The company said it’s exploring options for a longer-term funding solutions to provide future flexibility beyond the 3mt per annum base case. A longer-term funding solution could be implemented before any drawdown of the debt facility. This announced debt facility has “flexible terms to enable refinancing prior to maturity if drawn”.
Management comments
The Liontown Managing Director and CEO Tony Ottaviano said:
Liontown is very pleased to announce the debt funding facility today and I would like to acknowledge our lending syndicate for their support which once again reinforces the world-class qualities of the Kathleen Valley Project.
Having this funding in place provides strong endorsement for our project and a platform of financial certainty from which to move forward. We are consequently well-positioned to deliver the remaining milestones to first production mid-year and ramp-up towards anticipated cashflows.
Final thoughts on the Liontown share price
This deal has given investors confidence about what’s going to happen next. However, Liontown’s success will be heavily influenced by the lithium price. If the lithium price recovers, I’d guess it will be a lot easier to get that longer-term funding.
