As expected, Allkem Limited – the renamed Galaxy Resources / Orocobre merged entity – revealed a record result yesterday, joining the likes of Pilbara Minerals, SQM and Albemarle in confirming the lithium boom is producing very strong financial returns.
The Allkem results include the former Galaxy assets for the 10-month period post-merger date, between August 25, 2021 to June 30 this year.
The merged group produced a nine-fold surge in net earnings for the year to June 30 to $US337.2 million (around $A485 million) compared with a loss of $US89.5 million for the year before.
Group EBITDA hit $US513.1 million as the merger paid off for the two companies on an 800% jump in revenue to $US770 million ($A1.1 billion).
The net profit includes one off charges of $US12.8 million for Galaxy merger costs, an inventory uplift on purchase price allocation related to the merger of $US12.4 million, $US13.4 million related to amortisation of customer contracts due to purchase price allocation, gains of $US32.0 million from financial instruments, and foreign exchange losses of $US9.6 million. Net finance costs were $US13.8 million.
The company had a cash balance of $US664 million at June 30 this year, more than double the $US258 million of a year earlier and a clear indication of the surge in cash flowing through its accounts post-merger as production, sales and prices all rose at the same time.
In commentary, the company said the “merger has generated substantial value through the combination of outstanding operating assets and development projects.”
“The Company has restructured around the global portfolio and continues to strengthen the management, operating and development teams by attracting the highest quality personnel.
“New development and expansions are expected to see the business expand three-fold by 2026 with the aim of maintaining 10% market share as the lithium industry continues to grow with the increasing adoption of electric vehicles.
Mt Cattlin in WA and Olaroz in Argentina delivered record annual production volumes and operating profits despite the ongoing impacts of COVID-19
Record revenue from Mt Cattlin was generated from sales of 200,715 dry metrics tonnes (dmt) of spodumene concentrate at an average price of $US2,221/tonne CIF from August 25, 2021 to June 30 at a gross cash margin of 80%.
There was also record revenue from Olaroz which increased 341% to $US293 million on sales of 12,512 tonnes of lithium carbonate with average pricing increasing by 370% to $US23,398/t FOB. The gross profit margin was 82
For the current December half year Allkem says it is looking at a more than doubling in lithium carbonate prices to around $US47,000a tonne FOB (excluding the new Naraha plant in Japan.
September quarter spodumene concentrate prices are expected to be over $US5,000 a tonne (CIF SC6 level).
CEO, Martin Perez de Solay said in Thursday’s statement:
“This has been a transformational year with the highly successful merger of Orocobre and Galaxy which now provides shareholders exposure to strongly profitable existing operations and an enviable suite of development assets.
“We achieved record revenue for the Group, not only from strengthened pricing but from successfully and safely producing high-quality lithium products from our global operations that have managed costs, improved safety performance and delivered record production during a period of supply chain disruption, labour shortage, high inflation and ongoing COVID-19 impacts.
“Amidst surging demand for lithium products our team also achieved significant advancements at all our development assets across the globe with both Olaroz Stage 2 and Naraha on the cusp of commissioning this calendar year. Sal de Vida construction is well underway and James Bay permitting is advancing.
“With two revenue generating operations being supplemented by new operations in FY23 and a strong balance sheet, we are fully funded to complete construction at Sal de Vida and the development of James Bay.”
Allkem shares eased 0.9% to $13.75.
