Liontown kicks off production at Australia’s first underground lithium mine

Liontown Resources (ASX: LTR) has kicked off production at Australia’s first underground lithium mine at Kathleen Valley, nearly a year after starting production from its two open pits, though price challenges persist in the lithium market.

The successful start of underground production stoping from the Mt Mann orebody is a “key milestone” in the transition from open pit to underground operations, the miner said on Wednesday.

“As part of normal preparations and planning, we undertook underground ore trials in the March quarter, in advance of first stoping, to understand the optimal plant performance settings,” Liontown’s managing director and CEO Tony Ottaviano said in a release. “The trials delivered results in line with our study work, which reinforces our confidence in transitioning to full underground operations.”

Liontown shares fell by 1% to A47¢ apiece at markets close in Sydney on Wednesday, for a market capitalization of A$1.3 billion. Its shares traded in a 52-week range 42¢ to A$1.54.

The company’s underground production start follows a difficult period for lithium miners when prices of the critical metal used in electric vehicle batteries have plummeted more than 80% since their late 2022 peak. Last November, Liontown scaled back its production plans for Kathleen Valley to a rate of 2.8 million metric tons per year from the end of fiscal year 2027, down from its earlier target of 3 million tons by the end of the first quarter of 2025. Other lithium miners, including Mineral Resources (ASX: MIN) in Australia and U.S.-based Piedmont Lithium (NASDAQ, ASX: PLL) also reduced production or cut costs.

Backed by Australian billionaire Gina Rinehart, Liontown started open-pit mining at Kathleen Valley in Western Australia in July 2024, with the aim of eventually transitioning to an underground-only operation by the end of the 2026 financial year.

First stoping

The first stope firing extracted roughly 1,500 tonnes of ore, part of an initial stope designed to extract 12,000 tonnes — equivalent to two days of plant production.

Liontown expects the mine to offer advantages over traditional open-pit operations, including reduced dilution and waste contamination, higher lithia recoveries, and improved ore fragmentation for more efficient processing.

The company’s trials in March sought to confirm the treatability of underground ore, with a head grade of approximately 1.5% lithium oxide and recoveries exceeding 70%. Further optimization is expected through recovery improvement projects, it noted, targeting a recovery of 78% across the life of mine.

Moving forward, the company will remain focused on advancing the underground decline, opening additional working areas and ramping up mining activity. As previously stated, it aims for the mill to be supplied solely from underground ore and stockpiles by the fourth quarter of FY2026.

The Kathleen Valley operations have been optimized to an initial capacity of 2.8 million tonnes per annum to produce approximately 500,000 tonnes of spodumene concentrate a year. A 4-million-tonne-per-annum expansion is planned in year six, which is expected to deliver approximately 700,000 tonnes of spodumene concentrate. Its estimated mine life is 23 years.

Liontown currently has offtake agreements with LG Energy Solution, Tesla and Ford for initial terms of five years.