Liontown Resources Ltd (ASX: LTR) shares will be one to watch next week.
That's because the lithium miner will be releasing its quarterly update before the market open on Thursday 31 October.
This will be the company's first quarterly report since the commencement of production at the Kathleen Valley Lithium Project at the end of July.
Ahead of the release, let's see what the market is expecting from the miner.
Image source: Getty Images
Liontown quarterly preview
According to a note out of Goldman Sachs, it is expecting Liontown to report spodumene production of 25,000 tonnes for the three months. Whereas the analyst consensus estimate is for slightly lower production of 22,000 tonnes.
This is expected to underpin spodumene sales volumes of 12,000 tonnes according to Goldman and 9,000 tonnes according to consensus estimates.
Goldman expects Liontown's production to be achieved with a cash cost of $5,878 per tonne, whereas the consensus estimate is $6,977 per tonne.
Though, it doesn't really matter which is correct because they are both significantly higher than current spot 6% spodumene price of US$750 per tonne. So, Liontown may be generating revenue now, but it comes at a loss on the bottom line.
How does this compare to peers?
Firstly, it is worth noting that Liontown was only producing lithium for two of the three months.
In addition, it has been ramping up its operations, so this quarterly update is not a true reflection of its future production and cost performance.
With that in mind, Pilbara Minerals Ltd (ASX: PLS) is expected to produce 208,000 tonnes of spodumene for the quarter with a cash cost of A$814 per tonne. Whereas IGO Ltd (ASX: IGO) is forecast to produce 358,000 tonnes with a lowly cash cost of A$354 per tonne.
Should you buy Liontown shares?
Goldman Sachs is sitting on the fence when it comes to Liontown shares.
It currently has a neutral rating on them, but its price target of 95 cents implies potential upside of almost 14% for investors over the next 12 months. It said:
Though perceived funding risks are largely alleviated, and cost/ramp up risks appear increasingly priced in, we rate LTR a Neutral on: 1) Valuation, where LTR is trading at a modest discount to peers, though with significant potential valuation uplift from de-risking/valuation roll-forward and a high valuation sensitivity to our LT lithium pricing; 2) Ramp up/cost risks increasingly priced in; 3) Strong medium-term capacity outlook from large, high quality resource.
