Allkem's strong 2022-23 results pave the way for merger with Livent

Company News

by Glenn Dyer

Australian-Argentinian lithium conglomerate Allkem (ASX:AKE) has positioned itself favorably for an impending merger with its US-based counterpart, Livent, following the disclosure of its robust 2022-23 financial performance.

Allkem reported a full-year profit of $524.6 million USD ($817 million AUD) ahead of a crucial shareholder vote on its upcoming union with Livent, slated for later this year. In comparison, Livent reported a full-year income of $273.5 million USD on revenue amounting to $813 million USD for the year 2022.

Group revenue for Allkem climbed to $1.2 billion USD for the fiscal year ending in June. This figure could have been higher had it not been for the decline in lithium prices during late 2022 and early 2023.

Based on its performance, Allkem shareholders appear justified in owning at least 56% of the merged entity. The combined company is expected to amass revenue exceeding $2 billion USD and earnings close to $1 billion USD.

Allkem's operations in Australia and Argentina both exhibited solid performance. The Olaroz Lithium Facility in Argentina achieved a record annual production of 16,703 tonnes, marking a substantial 30% YoY increase and surpassing the previous record set in FY22. Consequently, Olaroz experienced record revenue, surging by 102% to reach $592.2 million USD, driven by the sale of 13,186 tonnes of lithium carbonate, including revenue from by-product sales.

The average realised pricing for lithium carbonate almost doubled YoY, reaching $43,981 per tonne Free On Board (FOB). Allkem noted that the gross cash margin remained robust at 89%.

In Western Australia, the Mt Cattlin mine delivered 130,984 dry metric tonnes (dmt) of spodumene concentrate, showcasing significant operational improvements by the end of the fiscal year. This translated to record revenue of $615.6 million USD for Mt Cattlin, marking a 36% YoY increase. The revenue included $513.7 million USD generated from spodumene sales of 105,291 dmt and $99.7 million USD generated from low-grade sales.

The average spodumene price more than doubled YoY to $4,879 per tonne Cost, Insurance, and Freight (CIF). The gross cash margin remained consistent at 78%.

CEO Martin Perez de Solay noted the outstanding results, emphasising record production at Olaroz and robust performance at Mt Cattlin. He stated, "Amidst strong demand for lithium, we delivered first production at the Naraha Lithium Hydroxide Plant and achieved first production at Olaroz Stage 2. Sal de Vida construction is well underway, and James Bay is advancing with approvals received by the Federal government for the ESIA."

With this strong financial foundation, Allkem is set to progress towards completing the construction of Sal de Vida and the development of James Bay. Perez de Solay highlighted that the merger with Livent will accelerate their strategy of becoming a global leader in integrated lithium chemicals production.

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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