Allkem share price falls on mixed lithium update

This lithium giant has released a mixed announcement…

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a miniature moulded model of a man bent over with a pick working stands behind a sign that has lithium's scientific abbreviation 'Li' with the word lithium underneath it against a sparse bland background.

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Key points

  • Allkem shares are under pressure on Monday
  • This morning the lithium miner upgraded its pricing guidance for lithium carbonate
  • However, it downgraded its shipments guidance for lithium spodumene concentrate

The Allkem Ltd (ASX: AKE) share price is falling on Monday.

In early trade, the lithium miner’s shares are down 2% to $11.60.

Why is the Allkem share price falling?

Investors have been selling down the Allkem share price on Monday following the release of announcement out of the company relating to pricing and its guidance.

According to the release, continued strong market conditions have positively impacted the price received for lithium carbonate from the Olaroz Lithium Facility during the current quarter.

As a result, The June quarter FY 2022 average price received for lithium carbonate is expected to be approximately 14% above its prior guidance at US$40,000 per tonne FOB on sales of approximately 3,500 tonnes.

Allkem highlights that its customers continue to value security of supply which is reflected in a fully committed order book for the remainder of the calendar year.

Spodumene production disappoints

Things haven’t been quite as positive for its lithium spodumene concentrate operations.

Realised spodumene concentrate pricing in the June quarter has been approximately US$5,000 per tonne SC6% CIF. This is in line with prior guidance and based on anticipated quarterly shipments of approximately 38,000 dry metric tonnes at an average grade of 5.3%.

However, this will only bring its full year spodumene production to 192,000 to 196,000 dry metric tonnes, which will be 2% to 4% short of guidance.

Management advised that this has been driven by production delays resulting from the highly competitive Western Australian resources labour market and COVID-19 related requirements. Strategies have been implemented to mitigate these temporary impacts on production.

No details have been provided about how this may have impacted its costs.

Argentina reference price

Finally, concerns over news that Argentina has set a reference price for lithium put pressure on the Allkem share price this month.

However, Allkem isn’t concerned by the development. It explained:

Argentina’s Customs Agency has recently set a reference price for lithium carbonate of US$53,000/t. This reference price is used by regulatory authorities when reviewing export sales of lithium chemicals to prevent under-invoicing and improve pricing transparency. This price is not used for calculation of taxes, royalties or duties and Allkem does not expect it will have any material impact on product exports, realised prices or profitability.

Motley Fool contributor James Mickleboro has positions in Allkem Limited. 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 Scott Phillips.

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