Allkem fully charged and ready to roll

Lithium group Allkem (ASX:AKE) has joined rivals such as Pilbara Minerals (ASX:PLS) and Albemarle (of the US) in showing there’s a lot of money to be made from the lithium gig, with prospects of a lot more to come.

In its June quarter and full year production and sales report, released Wednesday, Allkem revealed that it ended 2021-22 with the wind behind its back with better times ahead, at least in the current September quarter.

Allkem revealed record June quarter group revenue of around $US$337 million and a group gross operating cash margin of approximately US$292 million for the three months.

As a result, group revenue for the 2022 financial year (including Mt Cattlin from the merger date August 25, 2021) totalled $US762 million and group gross operating cash margin was approximately $US594 million (excluding corporate and other non-operating costs).

Allkem said all this revenue saw it finish the June year with a very solid cash balance of $US663.2 million, which was up $US213.1 million from the end of the March quarter.

Looking at its operations, Allkem said the Mt Cattlin mine achieved production of 24,845 dry metric tonnes (dmt) and shipments of 37,837 dry metric tonnes (dmt) of spodumene in the quarter despite Covid cases impacting mining.

This saw Mt Cattlin deliver record quarterly revenue of $US188.9 million with a gross cash margin of 84% based on average pricing of $US4,992 a dry metric tonne (dmt)

For the year to June Mt Cattlin reported record full-year production of 193,563 dmt.

It was a similar story in Argentina at Allkem’s Olaroz Lithium Facility. During the quarter, Allkem reported production and sales of lithium carbonate of 3,445 tonnes and 3,440 tonnes, respectively.

As a result the Olaroz Lithium Facility generated record quarterly revenue of around $US141 million with a gross cash margin of 90% based on average pricing of $US41,033 tonne of lithium carbonate in the quarter.

This meant record full year production at Olaroz Lithium Facility was12,863 tonnes of lithium carbonate. Approximately 47% of this was battery grade material, which was in line with targets.

For the current quarter, Allkem said in Wednesday’s release that “Customer demand in the spodumene market remains robust and spodumene concentrate pricing in the September quarter is expected to be higher than the June quarter.”

And for the lithium carbonate market, Allkem was more reticent, saying that management expecting the lithium carbonate sales price for the September quarter to remain similar to the June quarter.

But offsetting that upbeat outlook was a couple of doses of reality.

First up Allkem revealed that it is targeting Mt Cattlin spodumene production of approximately 160,000 to 170,000 tonnes this year down from just over 193,500 tonnes in 2021-22.

And costs remain a concern with the company cautioning that costs will be higher in2022-23.

This will be due to ongoing developments, lower production volumes, and labour shortages in Western Australia.

Investors were uncertain about the report – the news of lower expected production this financial year saw the shares dip to a day’s low of $9.32 but after a hard look at the revenue gains in the year to June and prospects for the continuation of those high prices, saw the shares end the day up 0.9% at $9.89.

Also helping was the improved sentiment in thew wider market after Wall Street enjoyed a solid session.