The Liontown Resources Ltd (ASX: LTR) share price is on the move on Thursday.
In morning trade, the lithium developer's shares are up 0.5% to $2.74.
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Why is the Liontown share price rising?
Investors have been buying Liontown shares today after the company revealed that it will push ahead with the delivery of Direct Shipping Ore (DSO) product. This will provide Liontown with an early source of revenue ahead of the first concentrate production at the Kathleen Valley Lithium Project next year.
DSO is lithium-rich spodumene ore in an unprocessed form. A number of ASX lithium shares have been taking advantage of the strong demand for lithium by exporting lithium in this form while they prepare for full production.
There are a couple of advantages to this. One is that it pulls in early revenue to support working capital. The other is that it allows companies to test their shipping processes ahead of full production activities.
According to the release, Liontown's DSO project has now been sanctioned, with contractor and equipment secured.
A total of 70,000 tonnes of DSO material has been stockpiled to the end of July following the commencement of mining operations at the Kathleens Corner and Mt Mann open pits in January 2023.
Management is targeting an initial sale of 250,000 to 300,000 tonnes of >1% grade DSO prior to first concentrate production, with the first shipment targeted by the end of calendar year 2023.
Is it worth doing?
The good news is that Liontown believes "the economics of the DSO opportunity are compelling." That's because a substantial portion of mining costs for the DSO material is already sunk as development capital.
Liontown's Managing Director and CEO, Tony Ottaviano, said:
Liontown's mining team has continued to optimise our mining plan, which has created the opportunity for early revenue through the sale of DSO. It illustrates the depth of our team and our commitment to realising the full potential of Kathleen Valley.
As a lithium producer in a Tier-1 jurisdiction we bring a distinct and reliable benefit to customers. Therefore, progressing with the production of DSO not only provides early revenue potential, but also enables us to derisk the project by field testing our ore sorting and logistics solutions on a smaller scale ahead of first concentrate production mid-2024.
