Will Liontown Resources post a profit in 2023?

The company's future profitability currently relies on its Kathleen Valley lithium project.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points
  • The Liontown Resources share price has boomed this year as construction continues at the company's cornerstone Kathleen Valley project
  • The project isn't expected to reach production until 2024, likely bringing the company's expected maiden revenue with it
  • Thus, Liontown Resources is unlikely to reach profitability in 2023

The Liontown Resources Ltd (ASX: LTR) share price has been off to a flying start in 2023. Could the remainder of the year house the company's maiden profit?

Let's break down the company's projected path to profitability to find if this could be the year shareholders are rewarded with positive earnings.

Right now, the S&P/ASX 200 Index (ASX: XJO) lithium share is trading at $1.525. That's 24.5% higher than it was at the start of 2023.

For comparison, the ASX 200 has gained 7% year to date.

A man sits in deep thought with a pen held to his lips as he ponders his computer screen with a laptop open next to him on his desk in a home office environment.

Image source: Getty Images

What is the ASX 200 lithium share up to?

Liontown Resources is currently working on its cornerstone Kathleen Valley lithium project, located in Western Australia.

The project is said to house one of the largest and highest-grade hard rock lithium deposits in the world. It's expected to be capable of producing around 500,000 tonnes of 6% lithium oxide concentrate every year.

It's no surprise, then, that the lithium share is so popular among ASX market watchers.

However, the first production – and potentially its first revenue – is still some way away.

Liontown likely won't post a profit in 2023

The key ingredient ASX 200 lithium shares need to achieve profitability is, of course, saleable product. Sadly, those expecting Liontown to produce saleable lithium in 2023 will likely be disappointed.

The company is aiming to achieve its first production at Kathleen Valley in mid-2024. And it still has quite a bit to spend before it reaches the milestone.

It's already sunk around $73 million into the venture and believes it has another $685 million or so to go.

Fortunately, it has around $385 million of cash and a $300 million debt facility provided by offtake partner and automaker Ford Motor Company (NYSE: F). Though, it will probably need additional capital prior to its maiden production.

On top of that, exploration at the company's Buldania project will likely weigh on its balance sheet over the coming years.

Though, the ASX 200 lithium share recently flagged an early revenue opportunity.

A change in the Kathleen Valley mining plan may have unlocked a direct ship ore (DSO) opportunity like that recently employed by Core Lithium Ltd (ASX: CXO).

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Resources Shares

An engineer takes a break on a staircase and looks out over a huge open pit coal mine as the sun rises in the background.
Resources Shares

Buying BHP shares? Meet your new CEO

BHP announced that Mike Henry is stepping down as CEO after six and half years. Guess who’s taking over the…

Read more »

Business people standing at a mine site smiling.
Resources Shares

3 things about BHP stock every smart investor knows

Let's dig into what’s interesting about BHP today...

Read more »

Female miner standing smiling in a mine.
Small Cap Shares

2 ASX small-cap mining shares rated buy: Morgans

Top broker Morgans has issued new notes on these two ASX small-cap mining stocks.

Read more »

A coal miner smiling and holding a coal rock, symbolising a rising share price.
Resources Shares

Which ASX mining project developer is 60% undervalued according to Canaccord Genuity?

There could be serious upside for this nickel project developer.

Read more »

Worker in hard hat looks puzzled with one hand on chin
Small Cap Shares

2 ASX small-cap mining shares to sell: Experts

These 2 ASX small-caps have rocketed over the past 12 months, and experts say it's time to sell.

Read more »

Two mining workers in orange high vis vests walk and talk at a mining site.
Resources Shares

This ASX mining stock just jumped again. Here's what it announced today

Dateline shares rise again following a rare earths exploration update.

Read more »

thoughtful investor sitting at computer
Resources Shares

Should you buy the dip on ASX mining shares?

ASX mining shares have fallen furthest since the war in Iran broke out.

Read more »

Cheerful businessman with a mining hat on the table sitting back with his arms behind his head while looking at his laptop's screen.
Resources Shares

Morgans names 3 ASX mining stocks to buy

Let's see which stocks the broker is bullish on this month.

Read more »