Liontown (ASX: LTR) Falls on H1 Loss Despite Production Breakthrough- Is Now the Time to Buy?

Liontown’s production is improving, but lithium risks remain

Liontown Resources (ASX: LTR) delivered H1 FY2026 results on March 11, leaving the market conflicted. On one hand, total revenue and other income more than doubled to A$208 million compared to the same time last year, and the underground mine at Kathleen Valley is genuinely performing well. On the other hand, the company posted an A$184 million loss, and South Korean battery giant LG Energy Solution quietly walked away from its entire shareholding just weeks before. For investors, the real question is whether this is a temporary growing pain worth backing or a sign of deeper trouble ahead.

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Kathleen Valley Hits Underground Stride – But at What Cost?

The operational story here is more encouraging than the headline loss suggests. Kathleen Valley has completed its full transition to underground mining, making it Australia’s first and only underground lithium mine. Production is ramping well, recoveries are improving, and the processing plant is running reliably.

That matters because underground ore is higher grade and cleaner than open-pit ore. As more of it flows through the mill, the company should produce more lithium product per tonne, pushing costs down and margins up over time. Management is guiding for a materially stronger second half, and based on the operational progress, we believe that trajectory is credible.

So why the large loss? The key point is that most of it was a one-off, non-cash accounting charge tied to LG Energy’s convertible notes. That charge will not repeat. In fact, because the notes converted in February 2026, management has confirmed an A$58 million non-cash gain will flow through the books in the H2 results, effectively reversing part of the H1 hit. When you strip it out, the underlying business is still loss-making, but the picture looks far less alarming than the headline number implies.

What the LG Energy Exit Actually Signals

In late February 2026, LG Energy Solution sold its entire 7.5% stake in Liontown through a discounted block trade, fully exiting the share register. That spooked the market, and understandably so.

We believe this was a portfolio capital decision by LG rather than a loss of confidence in the mine itself. The important point is that LG’s 10-year offtake agreement with Liontown remains intact. The commercial relationship that actually drives Liontown’s revenue has not changed. That said, losing a high-profile strategic backer does weaken investor sentiment in the near term, and that is a real headwind worth acknowledging. Liontown closed the half with A$390 million in cash, which provides a comfortable runway as the ramp-up continues.

The Investor’s Takeaway

The bull case comes down to one idea: the losses are mostly temporary, and the revenue trajectory is real. As underground production scales, recoveries improve, and lithium prices recover from current lows, the financial picture should look very different by FY2027.

The bear case is harder to ignore, though. Lithium prices remain under pressure, the offtake partner has exited as a shareholder, and the company is still burning cash. These are not small risks.

In our view, Liontown suits patient investors with a 12 to 24-month horizon. For existing holders, the operational progress supports staying the course. For new investors, we would want to see one more quarter of improving results before calling this a clear buying opportunity at around A$1.62.