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Date : 12/06/2022

Allkem Ltd (ASX: AKE) shares are declining after the lithium update

Allkem Ltd (ASX AKE), formerly known as Orocobre Limited (ASX: ORE), is a growing mineral stock on ASX. The company headquarter is located in Brisbane.

Its presence in the Australian resource market is quite impactful. They have different lithium and other mineral resource assets worldwide. Its Argentine resources include lithium carbonate and boron. Allkem produces hard-rock lithium in Australia and lithium hydroxide in Japan. It’s Japan’s largest lithium plant. Lithium hydroxide production is expected to increase as a result of this initiative.

Allkem is a lithium manufacturer with an industrial clientele. The firm claims to be the world’s largest lithium producer and offers the lowest prices. Olaroz, Cauchari Lithium Project, and Naraha lithium hydroxide factory are other Allkem assets.

Allkem has announced its lithium update, and the stock had started off the week by shedding some value due to the update.

AKE: Key Updates

Allkem Ltd (ASX: AKE) recently provided quarterly updates, and the numbers favour the investors. AKE stock is trading at $11.66, has lost around 2% in the intraday trading on Monday and has a market cap of around 7.44 Billion AUD.

alkem limited asx shares

  1. Allkem’s revenue for the third quarter totalled more than US$235 million.
  2. Thanks to strong market demand and high sales prices, the company’s gross operating cash margins were over $189 million.
  3. The corporation had $421.3 million in cash and cash equivalents at the end of March. $73.4 million was added to the company’s financial reserves due to the Mt Cattlin shipment.
  4. The Olaroz Stage 2 project is on target to commence its first production run in the second half of 2022 at 77% construction complete.
  5. Naraha’s facility will commence production this September quarter after the June quarter is spent on plant commissioning.
  6. The End of Life It’s projected that production will begin during the second part of CY23 after construction on Stage 1’s pond was completed in January.
  7. Federal and provincial officials received additional information on James Bay’s permits in the year’s first quarter.

The reason for the AKE stock Decline

AKE stock lost around 2% on Monday. The main reason for the decline in the stock is a mixed update about its lithium production. Due to the new updates, investors are selling their AKE shares in the market. Investors are not happy with the Spodumene production.

The company said that Olaroz Lithium Facility’s lithium carbonate pricing increased due to good market circumstances. In the June quarter of FY22, the average price obtained for lithium carbonate is estimated to be about 14% higher than the earlier forecast at US$40,000/t FOB1 on sales of roughly 3,500 tonnes. An order book wholly committed for the year’s balance shows that customers respect supply security.

AKE fails to attract Investors due to Spodumene Production 

Lithium carbonate shows good prospects, but things are not similar in the case of spodumene production.

A price of US$5,000/t SC6 percent CIF was realised for spodumene concentrate in the year’s second quarter. In the first quarter of 2022, the company expects to export 38,000 dry metric tons (dmt) of spodumene concentrate at an average grade according to client specifications of 5.3%.

Spodumene output for FY22 is expected to fall slightly short of expectations by around 2-4 percent, at between 192,000 and 196,000 dmt.

AKE: What about Argentina Price Reference?

The company said that Argentina’s new prices for lithium are putting pressure on AKE stock. The Customs Agency of Argentina has established a lithium carbonate reference price of $53,000 per tonne.

Regulatory agencies scrutinise the export sales of lithium compounds and use this price as a benchmark to avoid under-invoicing and enhance pricing transparency. For the foreseeable future, Allkem does not think that this pricing will significantly influence exports of its products, realised prices, or profits.

Conclusion

The new updates have adversely affected the AKE share price. Investors were reluctant on Monday and had mixed reactions to the AKE stock. Investors were selling their stock as the new update will have a short-term effect on the stock until the fiscal year 22 results are revealed and the new guidance is provided.

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