Allkem offers greatest leverage to lithium carbonate prices: Macquarie

Thu 17 Mar 22, 1:30pm (AEDT)
A snapshot of a brine lake containing lithium where material has been mounded into small humps on the surface of a brine system
Source: iStock

Key Points

  • Macquarie sees several growth levers for Allkem across its Argentina/Canadian assets
  • Allkem expects the Sal de Vida project to come online in the second-half of 2023
  • The James Bay project is targeting construction in the third-quarter of 2022

Macquarie analysts have upgraded their lithium price outlook on the back of strong electric vehicle demand backed up against softer supply.

The higher lithium price outlook is driving material earnings upgrades for local lithium producers, including Allkem (ASX: AKE).

“Allkem offers the greatest leverage to lithium carbonate prices, and we see upside to price guidance in the second-half of FY22 based on recent moves in regional lithium prices,” Macquarie analysts said in a note earlier this month. 

“The company boasts an impressive production growth profile, which is underpinned by the staged expansion of Olaroz and the development of Sal de Vida. Longer term, we expect AKE to increase spodumene production through the development of James Bay.”

Allkem Carbonate Prod

Macquarie held an Outperform rating on the stock with a $16.30 target price. 

The price target represents the most upside among the lithium and rare earths covered, which includes names like Pilbara Minerals (ASX: PLS), Lynas Rare Earths (ASX: LYC) and Liontown Resources (ASX: LTR).

Medium-to-long term growth projects

Allkem currently has two operational lithium projects.

  • Galaxy Resources' Mt Cattlin: a stable and mature operation

  • Argentina-based Olaroz: currently progressing a stage 2 expansion

On the growth front, Sal de Vida is an emerging tier 1 asset located in the Catamarca Province, Argentina.

Construction for Stage 1 commenced in January 22 and first production is expected in the second-half of 2023.

Stage 1 is targeting annual lithium carbonate production of 10,700 tonnes. A three stage expansion plan hopes to scale production up to 32,000 tonnes per annum.

To add some perspective, Olaroz produced 13,319 tones in FY21.

Galaxy Assets Resource Base
Sal de Vida has 6.23m in Li2CO3 Resource (Source: Galaxy Resources 2021)

James Bay is targeting construction in the third-quarter of 2022 and commissioning in the first-half of 2024 - targeting circa 330,000 tonnes of spodumene per annum.

Written By

Kerry Sun

Content Strategist

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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