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Allkem posts 1H FY22 earnings jump: Major upgrades to price guidance

Mon 28 Feb 22, 12:00pm (AEST)
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Key Points

  • Allkem earnings jump thanks to surging lithium prices
  • Growth options are underway for existing Mt Cattlin and Olaroz projects
  • New lithium conversion and mining projects on the horizon

Surging lithium prices has helped Allkem (ASX: AKE) deliver a significant uplift in earnings for the first-half of FY22.

The company's stock has reversed opening gains of 5.5%, now down -2% in late morning trade.

Financials at a glance

This is the first time Allkem will be reporting as a combined entity following its merger with Galaxy Resources. 

  • Revenue of US$192m

  • Net profit of US$13m

  • Cash and cash equivalents of US$450m 

Mt Cattlin: Stable and mature 

Mt Cattlin is an established WA-based mine, previously owned by Galaxy. The project has achieved a material uplift across all operational and financial metrics including: 

  • Revenue of US$155m, up 182%

  • Sales of 96,871 tonnes of spodumene, up 29%

  • Average selling price of US$1,186 a tonne, up 237%

Allkem said that March quarter pricing was already double December quarter prices, up 111% to US$2,500 a tonne. 

An exploration program has been planned to commence in March to “test immediate extension to mine-life”. 

The reopening of WA borders on 3 March is expected to reduce the pressure on staff and material resources, and improve cost management. 

Olaroz Stage 2 expansion in sight  

Olaroz sales were down -24% following a decision in 2020 to reduce excess inventory during significant market softness.

At the same time, costs rose 20% due to producing a higher grade of lithium carbonate as well as elevated labour and gas prices.

Allkem has upgraded its second-half price guidance for lithium carbonate to US$25,000 a tonne, up 125% compared to the first-half.

Allkem said its Stage 2 expansion reached 68% completion on 31 December. However, the company raised total Stage 2 costs by 10-15% to US$375-380 to reflect inflation and changes to project scope.

Growth projects

Allkem has largely completed the construction of the Naraha facility, designed to convert Olaroz lithium carbonate into lithium hydroxide.

Lithium hydroxide is a refined and more expensive product that enhances the performance of batteries.

First production at Naraha is expected to commence in the first-half of calendar year 2022.

In addition, construction at the Sal de Vida project has commenced.

Sal de Vida was previously owned by Galaxy, with a significant 6.2m brine resource estimate and 44-year project life.

Commissioning and first production is expected in the second-half of calendar year 2023.

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Allkem 12-month share price chart

 

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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