ENERGY MINERALS

Fat margins and record numbers for Allkem

ALLKEM ended financial year 2023 on a high with its Olaroz and Mount Cattlin operations both improved, delivering steady revenue despite a weaker second half lithium price and – most importantly – sustaining fat margins for its production.

James Bay is a major growth project

James Bay is a major growth project

Despite the market correction over the second half, Allkem's revenue for the June quarter was US$334 million and, with margins of 82%, group gross operating cash was $274 million, allowing net cash to rise $70 million to rise to $648 million.
 
 
Production was stronger than many analysts expected, with Olaroz stage one in Argentina delivering improved operations and plant availability, with the company closing in on its elusive nameplate after five years, while Mt Cattlin in Western Australia returned to more historical levels after issues earlier in the year.
 

Olaroz approaching nameplate

 
Production from Olaroz was 5059 tonnes for the June quarter, a rise 47% year-on-year, allowing an annual record of 16,703t of lithium carbonate.
 
Sales of 3430t generated $132 million with a gross cash margin of $32,172/t from a sales price of 38,062/t. Sales were below production as the company held some inventory back rather than sell it on the lower spot market at the time, managing director Martin Perez de Solay said.
 
Allkem said maintaining inventory was the right call given prices have recovered, and it remains confident that short term volatility will always be offset by the longer-term fundamentals given the market is crying out for product.
 
"We expect stability in the September quarter as demand continues to rise," he said.
 
The company commissioned Olaroz stage two just after the quarter and will see the benefits of that as it ramps up over the next 12-18 months.
 

Mt Cattlin recovers

 
The Mt Cattlin hard rock mine also delivered annual record production of 130,984t, exceeding guidance, with a 50% quarter-on-quarter increase with 58,059t at 5.3% for the June quarter.
 
Recoveries improved 67% as mining moved into better, higher-grade parts of the deposit.
 
Spodumene sales of 46,787t generated revenue of $201 million based on an SC6 equivalent price of $4800/t.
 
The open pit operation has at least four years ahead of it, based on increased reserves at a higher grade, despite mining depletion.
 
A feasibility study for a planned underground that may be more economic than further cutbacks beyond 2028 is expected next year.
 

Emerging options

 
The company's Naraha lithium hydroxide plant continues to move through commissioning and product qualification, with sales of 464t. There is not a strong market for technical-grade hydroxide, but de Solay said sales would ramp up as soon as it had secured battery-grade offtake deals.
 
Allkem's planned 330,000tpa James Bay project in Canada continues to advance engineering, however permitting has been slowed by recent wildfires. Those delays will have an impact on construction, depending on the number of winters involved, but the company said it was too early to update figures.
 
A resource update is pending.
 
The 15,000tpa Sal de Vida stage one brine development in Argentina continues to take shape, with the company still evaluating costs and development schedule following recent supply chain issues.  
 
The merger with Livent to create one of the world's top three lithium companies continues to advance through approvals, with de Solay still hopeful the deal can be completed by the end of the year.
 
An independent expert's report is expected later in September. 
 
Allkem shares were steady today at A$15.82, valuing it at $10 billion.

 

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