Lithium

Allkem FY22 earnings boom: Lithium production to grow threefold by 2026

Wed 20 Jul 22, 10:37am (AEST)
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Key Points

  • Mt Cattlin and Olaroz projects achieved record pricing, production and outsized margins in FY22
  • Several projects across South America, Japan and Canada expected to come online by 2024
  • Spodumene prices expected to be higher in the September quarter

Allkem (ASX: AKE) said strong cashflows and a robust balance sheet will fund the delivery of an aggressive growth strategy to increase production threefold by 2026 and maintain a 10% market share of the global lithium market.

The lithium heavyweight achieved record revenues in the June quarter of approximately US$337m and FY22 revenues of US$762m. Surging lithium prices supported outsized group operating cash margins of 78%.

Year-on-year comparisons were not available given the Orocobre and Galaxy merger in late August last year.

The record earnings propped up the company's cash position to US$663.2m, up US$213.1m from 31 March 2022.

Record production, prices and revenues

Allkem operates the Mt Cattlin hardrock project in WA and the Olaroz brine-based facility in Argentina.

Mt Cattlin achieved a record financial year production of 193,563 dry metric tonnes (dmt) of spodumene concentrate. In the June quarter, average spodumene pricing was US$4,992/dmt at gross cash margins of 84%.

“Customer demand in the spodumene market remains robust and spodumene concentrate pricing in the September quarter is expected to be higher than the June quarter,” the quarterly update said. 

Likewise, the Olaroz produced a record 12,863 tonnes of lithium carbonate in FY22. During the quarter, average pricing was US$41,033/t with gross cash margins of 90%.

Lithium carbonate prices for the September quarter are expected to remain similar to June quarter levels.

Monster pipeline

Allkem said the business is "entering a period of significant growth", with Olaroz Stage 2 and Naraha to begin production later this year, Sal de Vida expected to hit production status in 2023 and James Bay in 2024.

To recap Allkem’s development projects:

  • Olaroz Stage 2: Expand capacity to 25,000 tonnes per annum of technical grade lithium carbonate

  • Naraha (75% owned): Designed to convert Olaroz lithium carbonate into battery  grade lithium hydroxide at a production capacity of 10,000 tonnes per annum

  • Sal de Vida: Stage 1 production of 15,000 tonnes per annum of mainly battery grade lithium carbonate. Stage 2 expansion to 30,000 tonnes per annum

  • James Bay: Hard-rock lithium operation utilising hydro power. Targeting 321,000 tonnes per annum of lithium spodumene

Lithium market outlook

Allkem observed a 50% year-on-year increase in global EV sales to 2.2m units for the June quarter.

Spot prices for lithium carbonate and hydroxide in China fell -8% and -5% respectively, primarily due to lockdowns.

From a supply side perspective, spodumene shipped to China from Australia jumped 50% quarter-on-quarter in June.

Even with more supply coming online, the "race to secure key critical materials has further intensified across the EV battery value chain," said Allkem.

2022-07-20 10 25 17-Allkem Ltd (ASX AKE) Share Price - Market Index
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Written By

Kerry Sun

Finance Writer & Social Media

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

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