PERTH (miningweekly.com) – Lithium developer Liontown Resources has flagged a near 6% increase in the capital cost estimates for its Kathleen Valley project, in Western Australia, following the award of all major contracts.

The miner on Friday said that capital cost to first production was now estimated at A$951-million, up from the previous estimate of A$895-million.

The capital cost estimate excluded A$26-million for early mine development and the acceleration to a four-million-tonne-a-year production rate expansion, as well as A$37-million associated with the construction of the 567 000 t pre-first production run-of-mine stockpiles from the mining operations, which will be included in the operating costs once spodumene sales start.

Liontown earlier this week executed the underground mining services contract at Kathleen Valley, awarding the near A$1-billion four-year contract to Byrnecut Australia.

Preparatory works are underway at Kathleen Valley ahead of mobilisation of Byrnecut in the coming weeks, with the development of multiple declines from the Mt Mann box cut anticipated to start on schedule in November 2023.

With all major contracts now in place, Liontown is confident of delivering first production in mid-2024.

“With 50% of the work completed on site and construction work accelerating, we have clear line of sight to delivering first production from the world-class Kathleen Valley lithium project on schedule in mid-2024,” said MD and CEO Tony Ottaviano.

“Mining operations are well underway with Mt Mann pit completed and ready for the underground early works, and Kathleen’s Corner pit production increasing. We are also pleased to have secured the services of Tier-1 mining contractor Byrnecut who, in partnership with our own highly capable operational team, will bring its global expertise in starting and operating underground mines of the size and scale of the Kathleen Valley operations, making it a success.”

Meanwhile, Liontown on Friday also updated the operating cost estimates for Kathleen Valley, which now stood at A$651/t of spodumene concentrate over a ten-year average.

“Notwithstanding one of the toughest markets to construct and operate seen in recent years, our capital costs are materially in line with our previous forecast. Our operating costs are based on contracted market prices and have received a tremendous amount of review and benchmarking, both internally and by third parties,” said Ottaviano.

“I am very confident that the collective capability and multi-commodity experience of the team we have assembled will navigate these challenges and safely deliver this world-class project for our shareholders.

“In addition to our priority focus on project delivery, we continue to assist Albemarle with due diligence and to work through our funding options. Further updates on both these processes will be provided in due course.”

Ottaviano noted that Liontown was also in advanced discussions with a lender syndicate of commercial banks and government credit agencies to obtain the final funding requirements for Kathleen Valley.

The company expects a funding solution in place by the end of the calendar year, with additional funding not required until the commencement of 2024.

The size of the debt package is yet to be finally determined but, at a minimum, it is anticipated to cover the A$450-million required to fund the capital costs, early mine development for acceleration, costs associated with building the pre-first production run-of-mine stockpiles, corporate costs and working capital requirements through to the expected generation of positive net cash flows.

Liontown could also seek to increase the size of the debt funding sought to provide an additional liquidity buffer and reserve, the company said.

Meanwhile, Liontown has shelved the direct shipping ore (DSO) initiative at Kathleen Valley to provide an early source of revenue ahead of first concentrate production.

The company on Friday said it has undertaken ore sorting test work and had achieved positive results which confirmed the potential to process DSO into ore that could be added to the process plant stockpile or sold as DSO if market conditions improved.

With the lithium price softening, the company is planning to ore sort the DSO and add it to the stockpiles in order to be processed at the plant in future. However, Liontown told shareholders that the company would retain the option to sell the DSO if market conditions improved.