Why are Liontown shares getting hammered on Thursday?

This lithium developer isn't roaring today. But why?

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Liontown Resources Ltd (ASX: LTR) shares are falling more than most on Thursday.

In morning trade, the lithium developer's shares are down 9% to $1.53.

Why are Liontown shares tumbling?

There are a couple of reasons why investors have been selling Liontown's shares today.

The first is broad market weakness following a selloff on Wall Street overnight. Traders appear to have been taking profit after some very strong gains this month. This has led to the benchmark ASX 200 index dropping 0.5% this morning.

Also weighing on its shares today has been the release of an announcement.

According to the release, the company has been hit with legal proceedings in relation to royalties from the Kathleen Valley Lithium Project in Western Australia.

The company notes that it is party to a royalty deed in relation to an inherited private royalty which applies to certain tenements that now form part of the project.

It has received notice that the private royalty holder, Drem, has filed legal proceedings seeking declarations regarding the interpretation of the relevant documents and the amount of the royalty payable.

Liontown advised that the dispute between the parties is whether the amount of the royalty is calculated as 2%, or a lesser percentage, of gross sales of production from the relevant tenements.

Management advised that it will respond to the proceedings in due course, but does not believe that Drem's claim is material to the company. Nor will it impact the company's plan to commence production at the Kathleen Valley Lithium Project in mid-2024.

Motley Fool contributor James Mickleboro 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.

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