Ground Breakers: Allkem to more than double spodumene prices this quarter as lithium price goes ballistic
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Lithium prices are sky high right now and producers are in the midst of an all-time seller’s market.
Allkem (ASX:AKE), the lithium beast formed from the marriage of hard rock miner Galaxy Resources and brine producer Orocobre, is onto a winner right now.
Allkem, one of the stocks our experts list loves in the battery metals space, has released its June quarter pricing update and it’s sweet for shareholders.
The Mt Cattlin mine near Ravensthorpe in WA has been selling spodumene for a mine record US$2218/t on a 6% spodumene concentrate basis in the March quarter.
Allkem is now negotiating pricing for US$5000/t for the June quarter matching wild moves in the spot market in China.
It expects to ship some 50,000t to customers in Asia. Back of the envelope with very much unofficial maths, that’s a potential $330 million ($US250m) in revenue at current exchange rates (though some will come off for things like shipping, tax and product grades).
For reference, Allkem made just $192.1m in revenue in the entire first half of 2021 at both Mt Cattlin and its Olaroz project in Argentina.
And that was a record at the time. With prices for lithium carbonate at Olaroz also rising from US$27,236/t (9% above guidance) in the March quarter to US$35,000/t in the June quarter on projected sales of 3500t, the second half is certain to blow that one out of the water.
AKE’s pricing update should engender confidence in the market that supply is so constrained lithium companies who can be agile will be able to get close to market prices for their concentrate.
Repeat again: Seller’s. Market. Allkem stock was up 7.6% to a record $12.30 at 11am AEDT, giving it a market cap of $7.84 billion.
While some have gotten close to spot or even been price setters, notably Pilbara Minerals with its Battery Materials Exchange auctions, others have lagged market pricing like IGO (ASX:IGO), Tianqi and Albermarle at their Greenbushes mine.
They may not be producing anything yet but there are a large number of lithium explorers who have already moved into major indices like the ASX 300 off the back of excitement around the sector.
Sayona Mining (ASX:SYA) moved into 25-bagger territory since the start of January 2021 yesterday when the one time penny stock hit 25c a share (a market cap or ~$1.75b).
Sayona owns advanced exploration assets in Canada’s Quebec province, where it announced a doubling of the Authier and North American Lithium projects’ combined resource to 119.1 Mt at 1.05% Li2O at the start of March.
Entry into major indices, in particular the ASX 300 and ASX 200 can spur price rises and sharp volume increases for new entrants as index-linked funds rebalance their portfolios or pass hurdles for large and mid cap fund managers to purchase stocks under their guidelines.
Ioneer (ASX:INR) is also up ~25% over the past week amid a buying spree in junior lithium stocks and positive news out of the USA.
20% of that run came yesterday. The driving force seems to be the news the Biden Administration is looking to invoke the Defense Production Act to help fund an expansion of lithium production for EVs and batteries in the States.
Ioneer owns the Rhyolite Ridge project in Nevada.
Commodities were uneven overnight amid weak Chinese manufacturing data coming out of the Covid lockdowns in March.
The big iron ore and diversified stocks rose, led by South32 (ASX:S32), which was up 4.58% after dipping early in the week as aluminium prices fell and it announced delays to plans to buy a bigger stake in the Mozal smelter in Mozambique.
The materials sector is up 1.12% in morning trade.