The final investment decision comes despite a $72 million hike in the estimated costs of developing the project near Leinster from $473m to $545m because of scope changes and general cost escalation.
The low-interest deal with Ford represents the first time a carmaker has provided debt funding directly to an aspiring lithium miner. The $300m in cash will be provided at the bank bill swap rate plus a fixed margin of 1.5 per cent.
Ford’s debt funding completes the funding puzzle to develop Kathleen Valley, boosting the $463m raised by Liontown in December.
The debt funding comes with a binding offtake agreement between the two parties for Liontown to supply the US car maker with an average 150,000 tonnes of lithium concentrate a year for five years from the beginning of commercial production, expected in the second quarter of 2024.
It also highlights the growing scramble by automakers to secure the raw materials required to reach their aggressive EV production targets.
Car manufacturers are increasingly expected to make investments upstream in the battery supply chain to ensure the mines are built to provide battery ingredients needed for their vehicles.
The FID will spark the award of a series of contracts around engineering, procurement and construction management as well as power, freight and logistics, bulk earthworks and mining. The contract for the design and construction of the accommodation village has already been awarded to ADD Business Group.
Ford joins US electric vehicle pioneer Tesla and South Korean industrial giant LG as foundational customers of Kathleen Valley, with 90 per cent of initial production from Kathleen Valley now under sales agreements.
Kathleen Valley is forecast to initially produce about 500,000t of spodumene concentrate, expanding to about 700,000tpa over a 23-year mine life.
Liontown managing director Tony Ottaviano said the company’s disciplined approach to its offtake strategy had enabled it to build a customer base of Tier-1, globally significant customers in the EV battery supply chain, validating Kathleen Valley’s status as a globally relevant lithium asset.
“On the back of securing our third foundational offtaker and favourable debt financing arrangements, the board has moved swiftly and decisively to make a FID, underscoring Liontown’s collective determination to deliver Kathleen Valley as quickly as possible,” he said.
The FID comes despite ongoing concerns about building big projects in light of WA’s tight labour market and inflationary cost environment. On Monday, Evolution shelved a proposed expansion of the mill at its Mungari gold operations near Kalgoorlie citing the risks of rising costs.
Ford’s vice-president of EV industrialisation, Lisa Drake, said the automaker continued to push more deeply into the battery supply chain to meet its goal of delivering more than two million EVs annually for customers by 2026.
“This is one of several agreements we’re working on to help us secure raw materials to support our plan to deliver EVs for customers around the world and meet our environmental, social and governance commitments,” she said.
