Adds Hancock's comment in paragraph 11
Aug 7 (Reuters) - The Australian government said on Thursday it will invest A$50 million ($32.5 million) in Liontown Resources to help ramp up operations and transition to underground mining at its flagship Kathleen Valley project, in a bid to boost domestic minerals supply.
The investment, which will be undertaken through the A$15 billion National Reconstruction Fund Corporation, underscores Prime Minister Anthony Albanese's efforts to back critical mineral projects and boost domestic manufacturing.
"Lithium is a critical mineral that is central to both decarbonisation efforts and the government's Future Made in Australia strategy," NRFC CEO David Gall said.
"Australia is well-positioned to be a competitive, long-term supplier of lithium to the rest of the world and local lithium production is important to the nation's economic security and resilience."
In January, NRFC invested A$200 million in Arafura Rare Earths ARU.AX to develop a new mine and processing facility at its Nolans project in central Australia.
Kathleen Valley has a multi-decade mine life and will produce 500,000 tonnes of spodumene concentrate per annum with potential for expansion, according to NRFC.
Liontown LTR.AX is a key lithium supplier to Tesla TSLA.O, Ford F.N and LG Energy Solution 373220.KS.
The government's investment is part of Liontown's A$266 million institutional capital raise, priced at A$0.73 per share. Its shares were last trading at A$0.845 before being halted on Thursday pending the announcement.
The miner will use also the capital to shore up its balance sheet.
Australian billionaire Gina Rinehart's Hancock Prospecting is Liontown's top shareholder, with an 18% stake, as per LSEG data. Media reports indicate Hancock will not take part in the placement, which would dilute its stake.
Hancock declined to comment, while Liontown did not respond to a Reuters email seeking comment.
($1 = 1.5378 Australian dollars)
(Reporting by Nichiket Sunil in Bengaluru; Editing by Sonia Cheema)
((Nichiket.Sunil@thomsonreuters.com;))