Despite repeated attempts by brokers, analysts, so-called ‘experts’ and others to claim the lithium price boom is either dead or dying, it just keeps hanging in there.
As nervous punters take fright and sell off shares at every silly utterance from these experts, there are a handful of producers making money – a lot of money.
And future price levels are very high and deserve probing and analysis to make sure any sign of overheating can be reacted to quickly.
The trouble is that many analysts reckon current price levels for lithium (hydroxide and carbonate) are ‘overheated’ while others reckon this is going to be the norm for a while yet.
Take Australian-Argentinian play Allkem, which despite a dip in output from WA in the December quarter, still reported solid earnings and retained cash as it enjoyed higher prices for lithium and spodumene.
Allkem recorded an average of $US46,706 a tonne for its lithium carbonate during the quarter, which was up 16% from the September quarter and more than three times the $US12,491 a tonne average in the same quarter of 2021. Third party sales prices were even higher again – more than $US48,000 a tonne.
The price of its spodumene concentrate rose 5% quarter on quarter at $US5,284 per dry metric tonne – again more than three times the average price for the December 2021 quarter price of $US1,595.
Allkem said group revenue for the quarter was $US265 million, down 11% from $US298 million in the September quarter and its group gross operating cash margin was approximately $US218 million, a fat margin of 82%.
Compared with the December, 2021 quarter, revenue and cash was up significantly with lithium and spodumene prices soaring over the year.
For example, the Olaroz operation in Argentina saw the average price of lithium carbonate rise 16% from the September to the December quarter of last year.
But from the December, 2021 quarter, it was up more than 270%.
That saw record sales revenue of $US$151 million from the Olaroz operation in Argentina for the December quarter despite softer sales units. While that was up just 1% from the September quarter, it was up 267% from a year earlier.
Olaroz reported production of 4,253 tonnes of lithium carbonate. This was up 17% on the previous corresponding period and took its half year production to a record of 7,542 tonnes, 13% higher than the prior record in 2019.
The company saw revenue of $US83 million from the Mt Cattlin spodumene mine in WA. Limited ore availability cut production at the Mt Cattlin mine to 16,404 dry metric tonnes (dmt) of spodumene concentrate, from 17,606 dmt in the prior quarter.
An additional $US32 million in revenue was generated from shipments of 53,715 dmt of low grade spodumene concentrate.
And the company’s gross operating cash pile jumped more than 400% over the year thanks to higher tonnages and soaring prices.
So much so that cash on hand leapt more than 20% or $US105 million at the end of December to $US552 million.
And despite the doom and gloom about the outlook for quite a few quarters, Allkem’s management was upbeat, saying in the quarterly:
“EV (electric vehicle) sales growth is expected to remain robust in 2023 given strong order books and potential pent-up demand.
“Supportive government targets and policies announced globally (including subsidies or tax incentives) continue to ensure strong fundamentals for future growth.”
To this end Allkem revealed that it expects the weighted average price for third party sales of lithium carbonate products in the current quarter to be in line with what was received in the second quarter ($US53,013/tonne).
