Here’s why the Liontown (ASX:LTR) share price is rocketing 13% higher

The Liontown Resources Limited (ASX: LTR) share price has returned from its trading halt and is zooming higher.

In morning trade, the lithium developer’s shares are up 13% to $1.75.

Why is the Liontown share price zooming higher?

The Liontown share price is rising today after investors responded very positively to the release of an announcement.

According to the release, the company has made a major step towards the development of its flagship Kathleen Valley Lithium Project in Western Australia after executing its first binding offtake term sheet.

The release reveals that Liontown has signed its offtake agreement with one of the world’s premier battery manufacturers, LG Energy Solution (LGES). It is a major electric vehicle (EV) battery supplier for leading global automakers and is continuing to rapidly expand its business amid growing demand for lithium-ion batteries from the EV sector globally.

Liontown will supply LGES with up to 150,000 dry metric tonnes (dmt) per annum of spodumene concentrate produced at Kathleen Valley when production commences in 2024. This represents approximately one-third of the project’s start-up SC6.0 production capacity of ~500ktpa.

Under the offtake term sheet, pricing will be determined by a formula-based mechanism linked to market prices for Lithium hydroxide. Positively, based on today’s market pricing for lithium hydroxide, the contract terms would deliver a price outcome greater than the pricing assumptions used in its DFS.

Another positive is that the company revealed that it is continuing to progress negotiations with other potential Tier-1 global customers which would complement its off-take strategy.

“A fantastic outcome”

Liontown’s Managing Director and CEO, Tony Ottaviano, was very pleased with the agreement.

He said: “The signing of this historic first Offtake Term Sheet for Kathleen Valley represents a fantastic outcome for our shareholders and marks a very satisfying result for the Liontown Board and team. We have been steadfast in our strategy to negotiate terms that we believe accurately reflect the significance of our position in the global lithium market, as well as the quality and location of our Kathleen Valley resource to ensure that we extract the best value for our shareholders.”

“Not only is this Offtake Term Sheet consistent with our strategy, it also represents a strong validation for the Tier-1 credentials of the Kathleen Valley Project as one of the world’s premier new spodumene projects. Having a customer of the calibre and standing of LGES endorse the Project, by signing up to become a foundation customer, represents a significant vote of confidence in Kathleen Valley and in Liontown’s ambition to become a globally significant provider of battery materials for the clean energy market,” Mr Ottaviano added.

The post Here’s why the Liontown (ASX:LTR) share price is rocketing 13% higher appeared first on The Motley Fool Australia.

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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 Bruce Jackson.

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