On Friday, the highly awaited annual results from the lithium group, Allkem (ASX:AKE), will be released, providing insights into the anticipated merger with Livent.
Livent reported its results last week, revealing that its second-quarter profit had decreased from the first three months of the year but was significantly higher compared to the same period in June 2022.
The merger between the two companies remains on track for closure by the end of 2023. Under this merger, Livent shareholders will receive 2.406 NewCo NYSE listed shares of common stock for each Livent share they hold. Following the transaction, it is expected that Allkem and Livent shareholders will own approximately 56% and 44% of the newly merged company, respectively.
For the quarter, Allkem reported group revenue of around $334 million, with a gross operating cash margin of approximately $274 million (82%).
As of 30th June, the company’s group net cash stood at $648.4 million, marking an increase of $70.5 million from the end of the previous quarter in March.
On Friday, the company discreetly announced a significant upgrade to its James Bay lithium project in northern Québec, Canada. The new estimated resource stands at 110.2 million tonnes. This updated resource is the culmination of two drilling campaigns conducted on the project since early 2022, contributing roughly 37,500 metres of drilling to the deposit since the release of the previous feasibility study. Notably, the updated James Bay resource encompasses an initial inferred resource estimate for the NW Sector, which holds excellent growth potential due to its open-ended nature along strike and at depth. The NW Sector resource boasts a higher grade compared to the rest of the deposit, presenting an opportunity to enhance the grade profile of future operations.
Martin Perez de Solay, Allkem’s managing director and CEO, stated, “James Bay is now one of the largest spodumene lithium assets and clearly has the potential to grow even further as the boundaries of mineralisation are tested through an additional drilling program commencing later in the year.”
Allkem envisions the James Bay project as a sustainable, hard-rock operation powered by renewable energy, drawing from the company’s experience in mining spodumene at its Mt Cattlin operation in Australia. A feasibility study conducted in December 2021 outlined an average annual production of 321,000 tonnes per annum of 5.6% Li2O spodumene concentrate with an estimated mine life of approximately 19 years.
In Livent’s second quarter, sales amounted to $235.8 million, up from $218.7 million a year ago but down by 7% from the preceding three months, up to March. Net income reached $90.2 million, as opposed to $60 million a year earlier and $114.8 million for the March quarter.
Livent mentioned that although sales volumes were relatively stable compared to the first quarter of 2023, average realised prices had slightly decreased, and overall costs were higher. CEO Paul Graves remarked, “We continued to see healthy demand from our customers, which helped support strong financial results in the second quarter. As anticipated, we experienced the lagged impact of lower market prices in certain lithium products and end markets, as well as higher operating costs during the quarter.”
Graves also noted, “We expect the financial performance of the second half of 2023 to be broadly similar to the first half of the year. This expectation is supported by pricing visibility from our existing customer contracts and the availability of incremental volume for sale in the latter half of the year.”
