Liontown (ASX: LTR) targets 100% of Centenario with up to US$40m exploration spend

Liontown Limited (ASX: LTR) shares climbed 6.53% on September 1 after the lithium producer signed a binding staged farm-in agreement with NEXT Lithium Corp. covering the Centenario lithium brine project in Argentina’s Salta Province. Liontown closed at A$1.305 from A$1.225 on August 31, after trading as high as A$1.33 on exceptionally heavy turnover of approximately 64.7 million shares.

The agreement gives Liontown a pathway to acquire up to 100% of Centenario while limiting its initial capital exposure. At initial completion, Liontown will pay US$5 million in cash and issue Liontown shares worth US$10 million. It can then earn a 49% interest by funding US$15 million of project expenditure over 24 months.

The move came only one trading day after Liontown released FY26 results showing record revenue of A$639 million, underlying EBITDA of A$147 million, operating cash flow of A$182 million and maiden statutory net profit after tax of A$93 million. Underlying NPAT was A$14 million after removing one-off effects, while Kathleen Valley produced 391,992 dry metric tonnes of concentrate and shipped 381,997 tonnes during the year.

How much could Liontown ultimately spend to own 100% of Centenario?

The transaction is structured in stages specifically so Liontown does not need to commit the full acquisition cost before drilling provides more geological information. The initial consideration is US$15 million, comprising US$5 million cash and US$10 million of Liontown shares. Liontown then earns 49% by funding US$15 million of Centenario expenditure over the first 24 months after completion.

After reaching 49%, Liontown can elect within 90 days to increase its interest to 51% by paying another US$15 million. It can subsequently earn 75% by funding an additional US$25 million of project expenditure over the following 24 months. Liontown describes the staged pathway as requiring up to US$40 million of project expenditure over four years, separate from milestone-based consideration.

If Liontown reaches 75%, it is required to acquire the remaining 25% at a value linked to the mineral resource estimate established after that stage, capped at US$125 million. Combined milestone consideration across the transaction can reach as much as US$140 million, depending on resource outcomes and progression through the stages.

NEXT Lithium can elect to receive certain later payments in cash, Liontown shares or a combination, subject to Liontown’s available placement capacity under Australian Securities Exchange rules. The structure therefore creates potential future dilution, but only if the project progresses far enough to justify subsequent ownership stages.

Why is Liontown moving into lithium brine after building Kathleen Valley around spodumene?

Kathleen Valley is a hard-rock spodumene operation in Western Australia, while Centenario offers exposure to lithium-bearing brines in Argentina’s established South American lithium region. The two assets therefore diversify Liontown across geology, geography and potentially processing technology rather than simply adding another mine with the same development profile.

Centenario sits near the Centenario-Ratones operation and the Pozuelos-Pastos Grandes project, placing Liontown in a region where lithium brine infrastructure, technical expertise and investor attention are already established. An existing transient electromagnetic survey has identified targets that Liontown intends to test as part of the initial US$15 million work program.

The strategic attraction is optionality. Liontown does not need Centenario to replace Kathleen Valley, which remains its central operating asset, and management has explicitly said Kathleen Valley continues to receive priority. Instead, Centenario gives the company an exploration-stage growth option that can be advanced according to results rather than forcing a full acquisition before resource quality is demonstrated.

That sequencing is particularly important in lithium, where commodity-price cycles can change project economics quickly. A staged farm-in allows Liontown to increase expenditure when geological results and market conditions justify it and stop before committing later-stage capital if they do not.

Does Liontown’s stronger FY26 balance sheet make the Argentina move easier to fund?

Liontown generated A$182 million of operating cash flow during FY26 as higher lithium pricing and production growth transformed the financial profile of Kathleen Valley. The company also reported A$561 million of cash at the end of the June quarter after generating A$137 million of net cash flow during that quarter.

That provides considerably greater flexibility than Liontown had during the most capital-intensive phases of Kathleen Valley construction. The US$5 million cash component of the initial Centenario consideration is small relative to the group’s current liquidity, while US$15 million of first-stage project expenditure is spread over up to 24 months.

The more significant capital priority remains Kathleen Valley. Liontown completed the transition to 100% underground mining during FY26 and is targeting a 2.8 million-tonne-per-year underground run rate by the end of FY27. A brownfield expansion study is also progressing toward a final investment decision, creating a competing requirement for growth capital.

That helps explain why the Centenario agreement is staged. Liontown can preserve cash for its producing Western Australian asset while progressively testing whether Argentina deserves a larger allocation.

Why did LTR rise 6.5% after the Centenario announcement?

Liontown closed September 1 at A$1.305, up from A$1.225 on August 31 and 9.2% above the A$1.195 August 28 close. The stock had already gained following the FY26 result, so the September 1 move extended rather than initiated the latest rebound.

At the closing price, Liontown’s market capitalisation was approximately A$4.15 billion. The initial US$15 million acquisition payment is therefore modest relative to the company’s equity value, which helps explain why investors can view the transaction primarily as strategic optionality rather than a balance-sheet-threatening acquisition.

The market may also be responding to the structure rather than simply to the words “Argentina” or “lithium brine.” Liontown has not paid an enterprise-scale upfront price for an unproven asset. It has secured the ability to progressively earn ownership while tying larger payments to exploration expenditure and eventual resource outcomes.

That discipline matters because Centenario remains an exploration project. Liontown still has to drill the geophysical targets, define lithium grades and aquifer characteristics, understand brine chemistry and demonstrate that extraction and processing can support competitive economics. A location inside an established lithium region does not automatically produce a commercially viable resource.

The deal nevertheless arrives at a stronger point in Liontown’s corporate cycle. FY26 delivered record revenue, positive underlying earnings and substantial operating cash flow, while Kathleen Valley is moving deeper into underground ramp-up. Centenario gives Liontown another growth route without changing the immediate priority: making its operating mine consistently profitable through the lithium cycle.