Liontown Shares Crash 15% as Investors Balk at Kathleen Valley Expansion Costs and Macquarie Cuts Target

SYDNEY — Shares of Liontown Ltd. plunged 15% on Thursday as investors weighed the cost of the lithium miner's newly approved expansion of its Kathleen Valley operation in Western Australia, a day after the company committed 389 million Australian dollars to the project.

The stock fell 14 cents, or 15.05%, to 79 cents, making it one of the worst performers on the S&P/ASX 200 index as the broader market slid nearly 2% to a four-month low.

The drop extends a punishing run for the stock. Liontown shares were down about 29% over the past week and nearly 47% for the year as of Thursday morning, according to Market Index data, and have fallen below the closely watched A$1 level.

Expansion approved

Liontown's board on Wednesday approved a final investment decision to expand Kathleen Valley, lifting processing capacity to 4.2 million tonnes a year from 2.8 million tonnes.

The expansion is designed to raise five-year average steady-state production to about 780,000 dry metric tonnes of spodumene concentrate a year from fiscal 2030, roughly 75% above the midpoint of the company's fiscal 2027 production guidance. Output is expected to peak above 800,000 tonnes in fiscal 2034.

"The Kathleen Valley Expansion is expected to lift our concentrate production by over 50% to a five-year average of 780,000 dmt from FY30, making Kathleen Valley one of the most significant hard-rock operations in the world," Managing Director and CEO Tony Ottaviano said.

The company said steady-state operating costs are targeted at A$840 to A$920 per tonne, about 23% below the midpoint of fiscal 2027 guidance. Construction is scheduled to be completed by the end of the second quarter of fiscal 2029.

Liontown plans to fund the expansion from existing cash and operating cash flow, with no equity raising planned. The company had A$561 million in cash at the end of June, and Kathleen Valley generated A$182 million in operating cash flow during fiscal 2026.

Higher capital spending

While the expansion promises lower costs and more output in the long run, the near-term spending bill rose sharply. Liontown lifted its fiscal 2027 capital expenditure guidance to A$435 million to A$495 million, up from A$320 million to A$370 million.

Production guidance for the current year of 390,000 to 440,000 tonnes and unit operating cost guidance of A$1,050 to A$1,250 per tonne sold were left unchanged.

The additional tonnes from the expansion are uncommitted, leaving Liontown free to sell them on the spot market, seek customer prepayments or sign new offtake contracts linked to spodumene prices.

Macquarie trims target

The share price slide accelerated Thursday after Macquarie cut its price target on the stock by 5% to A$1.20, though it kept an outperform rating.

The broker said the expansion is larger than it had assumed but will deliver output later and at higher cost. Macquarie had expected construction to be completed by the fourth quarter of fiscal 2028, earlier than the company's timeline, and said the midpoint of the new long-term cost guidance was about 10% above its own assumption.

Macquarie cut its earnings per share forecasts by 35% for fiscal 2028 and 40% for fiscal 2029. The firm noted the expansion's A$389 million capital cost was in line with its estimate and that funding from cash and operating cash flow reduces near-term equity risk.

The broker also said the expansion's projected payback of about 2.5 years assumes a long-term lithium price above its own forecast, leaving returns sensitive to the lithium market.

Lithium prices weigh

The expansion decision comes at a difficult time for the lithium sector. Chinese lithium prices slid during September, raising questions about the timing of new growth spending across the industry.

Other lithium stocks also came under pressure Thursday, with Elevra Lithium among the ASX 200's biggest decliners in early trade.

Investors have also been concerned about the execution risk of expanding Kathleen Valley while the operation is still ramping up its underground mine toward an annualized rate of 2.8 million tonnes by the end of fiscal 2027. The overlap means Liontown will be managing construction and a ramp-up at the same time.

Some analysts remain positive

Not all analysts are bearish. Bell Potter said this week that Liontown shares are undervalued.

Argonaut highlighted the flexibility created by the uncommitted expansion volumes. "The unincumbered expansion volumes also provide LTR with spot price and potential prepayment/contract flexibility," the firm said in a note to clients, adding that delivering on fiscal 2027 guidance and the ramp-up of Kathleen Valley are key catalysts.

Ottaviano has framed the project as a long-term bet designed to make the operation more resilient through the lithium price cycle.

"When the expansion is completed, it gives Kathleen Valley a scale that positions Liontown for sustained performance through the cycle, not just in the good years," he said.

About Liontown

Liontown is a Perth-based lithium producer whose flagship Kathleen Valley operation in Western Australia produced 392,000 tonnes of spodumene concentrate in fiscal 2026. Spodumene concentrate is a key raw material used to make lithium chemicals for electric vehicle batteries and energy storage.

The company has also struck a staged agreement related to the Centenario project, which could broaden its portfolio internationally, though management has said Kathleen Valley remains its priority.

Investors will be watching Liontown's progress on its fiscal 2027 production and cost targets, as well as the direction of lithium prices, which will play a major role in determining the returns from the expansion.

The company's next quarterly activities report, expected later this month, will offer an update on the Kathleen Valley ramp-up and early expansion work.