It was only on 3 September that an ASX notification showed Liontown (ASX:LTR) Chairman Tim Goyder adding one million Liontown shares to his account through a holding company.
That appeared to be a strong endorsement for Liontown, especially after the stock had fallen from $2.64 on 1 May to around $1.25 in early September.
Unfortunately for Goyder, at least in the short term, Liontown’s share price kept falling over the month.
This is not unique to LTR. The recent drawdown in the lithium price is causing most lithium shares to fall.
Liontown also came under pressure as investors digested its 30 September announcement of additional capital spending to expand its Kathleen Valley Lithium Project in Western Australia.
Overall, it’s been a difficult five months for LTR investors:
Source: TradingView
However, there may be some potential respite.
Benchmark Mineral Intelligence recently indicated that “fundamentals do not support recent bearishness holding through to the end of the year”.
Also of interest is what David Tuckwell says in Livewire Markets this week:
“The share price assumes a weak lithium market. Goldman says the stock is pricing in a spodumene price of about US$1,225 [$1,758] a tonne, well below today’s levels.”
If lithium can stabilise, Liontown should find support around this level, as long as production continues on track and all guidance is met. There’s still some uncertainty around this because LTR is ‘ramping up’ its operation to full capacity.
The macro outlook remains supportive. Battery demand is very strong, while elevated petrol and diesel prices continue to provide a strong incentive for drivers to switch to electric vehicles.
Bloomberg cites the CEO of French oil giant TotalEnergies (EPA:TTE), Patrick Pouyanné, as saying:
“We have observed, in the last six months, a huge surge of electric vehicle sales in many geographies … that could affect the oil demand, for sure.”
Whether this translates to a rebounding spodumene price for Australian producers like Liontown and PLS Group (ASX:PLS) remains to be seen.
Write to Callum Newman at Mining.com.au
Main image: Unsplash
