Liontown Resources Limited provided an update on development progress, key outcomes and scope changes stemming from an ongoing optimisation program for its 100%-owned Kathleen Valley Lithium Project (Kathleen Valley or the Project) in Western Australia. Kathleen Valley is one of the most significant new long-life lithium projects being constructed anywhere in the world and, with a portfolio of three Tier-1 foundation customers, is ideally positioned to capitalise on strong forecast demand for lithium raw materials over short- and medium-term. After declaring a Final Investment Decision (FID) in June 2022 and receipt of requisite approvals, Liontown commenced on-site construction activities at Kathleen Valley in October 2022.

The Company has since made rapid progress across all aspects of the Project and remains on schedule to deliver first production from the process plant to market by the middle of next year. Key site-based contracts including the accommodation village, earth works, concrete supply and installation, Tailings Storage Facility and the Power Purchase Agreement have been awarded, along with preliminary works for the open pit mining contract. Site works including installation of the accommodation village, concrete installation and preparation for the commencement of open pit mining are progressing rapidly.

Structural Mechanical Piping (SMP) and concentrate transport packages have also been put to tender, with proposals received and currently under assessment for award. Tender requests for the underground mining contract and Mine Services Area (MSA) design and construct contract are being prepared and are expected to go to market in first quarter of 2023. Commencement of underground mine development is targeted for fourth quarter of 2023.

In light of its strong focus on delivering first production from the process plant by mid-2024, Liontown has made prudent investments at an early stage in the construction timeline to de-risk and maintain this schedule. This has included Liontown's decision to invest in a ~60% increase in on-site accommodation capacity to support increased labour resources and de-risk schedule. The Company's November 2021 Definitive Feasibility Study (DFS) contemplated initial plant throughput of 2.5Mtpa, increasing to 4Mtpa in year six of operations.

Since the DFS, the Company has sought to debottleneck and optimise engineering design and project delivery, with the objective of maximizing near term production. Liontown now expects initial plant throughput capacity to be 3Mtpa. This expanded throughput capacity is expected to result in additional SC6.0 product being available early in the Project life for sale on the spot market or through incremental off-take arrangements, enabling Liontown to benefit from attractive lithium pricing expectations over the short- and medium-term.

The detailed open pit mine plan has been completed as part of the tender process, while the detailed underground mine plan for the first five years of operation is in the process of being finalised. Accordingly, the Company has a high degree of confidence that mining activities can meet the increased plant throughput requirements based on the existing Ore Reserves. As previously detailed, mine plan optimisation work undertaken recently has reduced the operational complexity of the DFS mine plan from both an open pit and underground mining perspective.

Open pit designs have been modified with the Kathleen's Corner pit expanded to produce more ore than assumed in the DFS and the Mount Mann pit reduced to a large box-cut, which is completed prior to underground portal establishment and subsequent decline development. Optimisation of the underground mine plan has focussed on initial stope production from the steep to moderately dipping, high tonnes per vertical metre (up to 180kt/m) Mount Mann orebody, supplemented by increasing production from the North West Flats. The larger Kathleen's Corner open pit will result in more material being moved over the initial project period increasing costs, but this may be offset through the potential unlocking of direct ship ore.

As stated above, the revised mine plan has liberated additional material which would have been stockpiled. The strong market conditions provide a potential opportunity to monetise this material as a DSO product and deliver early revenue during Kathleen Valley's pre and post-commissioning phase. The Company has commenced discussions with a range of existing and prospective customers and will now work to further assess the suitability of the available material for DSO.

Updates and further detail will be provided as this opportunity progresses. Kathleen Valley's engineering design and project delivery has been significantly refined and optimised since the completion of the DFS in November 2021 and FID in June 2022. As part of this process, several optimisation and scope changes have been made, including the 20% increase in initial throughput capacity to 3Mtpa, which have impacted the capital estimate for the Project.

Time to market and safe delivery of the Project to schedule remain a priority focus, with scope additions to de-risk the Project including: ~60% increase in on-site accommodation capacity to support increased labour resources and de-risk schedule; bringing certain critical infrastructure in house (e.g. mine workshops, changerooms and administration facilities); changing the location and increasing the number of wind turbines to optimise the contribution of wind in its renewables mix necessitating additional site works; and increasing water exploration and piping works for plant water to meet the new 3Mtpa plant production rate. In addition, the Company has now awarded several key contracts on a schedule of quantities basis (fixed rate), with tender submissions for the SMP and Site Facilities packages currently under review. More than 80% of long lead equipment by value has been ordered on a fixed cost basis and are on or ahead of schedule for delivery to site.

These awards and assessments made to-date have provided the Company with updated information on the likely overall capital cost of the Project and have informed the estimates for packages yet to be tendered. As is being seen across the industry, Liontown has experienced substantial escalation in rates across all site-based labour-intensive contracts with some tenders experiencing price increases greater than 30%. In addition to market-wide price escalation, a reduction in both productivity rates of, and the number of contractors willing to bid, has also been evident impacting tendered package prices.

The combination of optimisation, additional scope and cost escalation has resulted in Kathleen Valley's estimated capital cost to first production from the process plant increasing to $895 million inclusive of $40 million in contingency.