Why is the Allkem (ASX:AKE) share price rising again today?

This lithium share had a strong quarter…

| More on:
Cut outs of cogs and machinery with chemical symbol for lithium

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • Allkem was formed following the merger of Galaxy Resources and Orocobre
  • Its combined operations delivered strong revenues and generated significant cash during the first half
  • Its lithium pricing is expected to get even stronger during the second half

The Allkem Ltd (ASX: AKE) share price is on the move on Tuesday.

In morning trade, the lithium giant’s shares are up 2.5% to $11.63.

Why is the Allkem share price rising again?

The Allkem share price is rising today after it revealed that it reported strong production results and pricing from its Mt Cattlin and Olaroz operations during the first half.

Over at Mt Cattlin, the company achieved calendar year production of 230,065 dry metric tonnes (dmt) of spodumene concentrate. This compares to its previous guidance of 220,000 dmt. During the second quarter, a total of 38,071 tonnes were shipped, generating US$60.7 million in revenue. An additional shipment of 23,000 tonnes is scheduled for dispatch in January.

Pleasingly, Mt Cattlin looks set to benefit from positive lithium product pricing momentum in the second half of FY 2022. It notes that spodumene shipments are already at US$2,500/t CIF (6.0% Li2O).

For FY 2022, management expects Mt Cattlin concentrate production of 200,000 to 210,000 dmt with a grade of 5.5% to 5.7% and a cash cost of US$400 to US$430 per tonne.

Olaroz on form

Over at Olaroz, 3,644 tonnes of lithium carbonate were produced during the quarter. From this, 51% was battery grade, which was in line with guidance. Sales came in at 3,293 tonnes with an average price of US$12,491 per tonne FOB. This generated revenue of US$41.1 million with a gross cash margin of 65% (US$8,155/tonne).

Once again, prices look set to continue to improve in the near term. Management revealed that it expects lithium carbonate prices for the second half of FY 2022 to be approximately US$20,000 per tonne. This is up 60% from the prices commanded during the first half.

Quarterly revenue tops US$100 million

Allkem ultimately reported quarterly group revenue of approximately US$107 million and a group gross operating cash margin of US$70 million.

As a result of the above, at the end of the half, Allkem’s cash balance stood at US$426.6 million. From this, US$118.8 million is being held as a guarantee for the debt facilities until the practical completion for the Naraha and Olaroz Expansion projects.

Motley Fool contributor James Mickleboro owns Allkem shares. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Resources Shares

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.
Resources Shares

Here’s what led the Mineral Resources share price to sink 25% in June?

Minerals Resources shares have struggled to regain composure.

Read more »

a group of three men in hard hats and high visibility vests stand together at a mine site while one points and the others look on with piles of dirt and mining equipment in the background.
Materials Shares

Why are these ASX 200 mining shares behind the eight ball today?

The ASX 200 is up, but not all shares are in the green.

Read more »

Upset man in hard hat puts hand over face after Armada Metals share price sinks
Resources Shares

Why did the BHP share price have such a lousy FY22?

Although it paid big dividends during FY22, BHP’s total returns were negative.

Read more »

Broker holding red flag in front of bear
Resources Shares

South32 crashes into bear market in June as recession fears bite

The miner and metals producer has had a challenging month.

Read more »

Three business people stand on platforms in the desert and look out through telescopes.
Resources Shares

What is the outlook for the Rio Tinto share price in July?

Can this be the start of a recovery for the mining giant?

Read more »

a man wearing a hard hat and a high visibility vest stands with his arms crossed in front of heavy equipment at a mine site.
Broker Notes

Should investors dig the Fortescue share price in July?

Fortescue is suffering in the sell-off. Will things get better in July?

Read more »

An engineer takes a break on a staircase and looks out over a huge open pit coal mine as the sun rises in the background
Resources Shares

Why did the Rio Tinto share price plunge 11% in June?

Let's analyse the month just gone by.

Read more »

Young boy with glasses in a suit sits at a chair and reads a newspaper.
Resources Shares

How did the Fortescue share price perform in June?

The iron ore producer's shares have been experiencing a rough patch of late.

Read more »