HIGHLIGHTS
OPERATIONS
- Mt Cattlin’s strong performance continues, with CY21 annual production of 230,065 dry metric tonnes (“dmt”) of spodumene concentrate exceeding previous guidance of 220k dmt
- 38,071 tonnes were shipped in the quarter, generating
US$60.7 million in revenue, plus an additional shipment of 23kt is scheduled for dispatch inJanuary 2022 - Positive lithium product pricing momentum continues with indicative pricing for H2 FY22 spodumene shipments already at
US$2,500 /t CIF (6.0% Li2O) - At Olaroz2, 3,644 tonnes of lithium carbonate were produced, of which 51% was battery grade in line with guidance
- Sales were 3,293 tonnes at an average price of
US$12,491 /tonne FOB3 (65% battery grade) generating revenue ofUS$41 .1 million with a gross cash margin of 65% (US$8,155 /tonne) - Lithium carbonate prices for H2 FY22 are expected to be approximately
US$20,000 /t FOB3 up ~80% on the H1 FY22
DEVELOPMENT PROJECTS
- At Naraha Plant pre-commissioning works continue within COVID-19 restrictions
- Environmental permits for Sal de Vida Stage 1 have now been received and pond construction commenced in
January 2022 . Permitting and COVID-19 related delays mean first production from Stage 1 is anticipated to occur by H2 CY23 - A royalty agreement has been reached with the Catamarca provincial government at a rate of 3.5% of net sales revenue (revenue less taxes)
- The James Bay Feasibility Study and Maiden Ore Reserve was released confirming an economically viable, hard rock lithium operation utilising renewable hydropower. The operation is projected to generate a pre-tax NPV of
US$1.42 billion at an 8% discount rate with pre-tax internal rate of return of 45.8% and a pre-tax payback period of 2.4 years on a long term spodumene price ofUS$1,001 /tonne - Expansion works at Olaroz have reached 68% completion and first production is expected to commence in H2 CY22
- Total capital expenditure for the Olaroz expansion has been revised up by 10-15% to
US$365-380 million (see “Olaroz – Expansion”). The additional capital expenditure will be funded from guarantee funds that can be specifically used for overruns as detailed under “Corporate & Financials’’
CORPORATE & FINANCIALS
- Group revenue for the quarter was approximately
US$107 million and group gross operating cash margin1 was approximatelyUS$70 million - At 31 December group cash was
US$426.6 million , of whichUS$118.8 million is being held as a guarantee for the debt facilities until practical completion for the Naraha and Olaroz Expansion projects and can be used for overruns, working capital and Value Added Tax (“VAT”) - During the quarter
Allkem was included in the ASX/S&P 100 index and retained its position as a member of the Dow Jones Sustainability Australia Index Allkem has an enviable pipeline of expansion and development projects which it is intended to be detailed in an investor strategy presentation during March
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1 All figures presented in this report are unaudited and contain non-IFRS metrics. Gross operating cash margin is calculated as revenue less cash cost of goods sold, freight and insurance.
2 All figures 100%
3 “FOB” (Free On Board) excludes insurance and freight charges included in “CIF” (Cost, Insurance, Freight) pricing. Therefore, the Company’s reported prices are net of freight (shipping), insurance and sales commission. FOB prices are reported by the Company to provide clarity on the sales revenue that is recognised by SDJ, the joint venture company in
SUSTAINABILITY
Based on Allkem’s performance in the S&P Global Corporate Sustainability Assessment (“CSA”) the Company has once again been included as a member of the Dow Jones Sustainability Australia Index. As of
Safety performance
The
A major initiative regarding the escalation, reporting and investigation of Near-Miss, High-Potential Events has complemented the rollout of company Health, Safety and Environmental standards. The company also embarked on the rollout of a single, standardised Health, Safety and Environment Reporting platform to unify all operations and projects into the Intelex system. This system is also intended to be the platform for the Mt Cattlin pilot program for Principal
COVID-19 response
With the escalation of global COVID-19 cases due to the Omicron variant, work teams in
Argentinian operations have 88% of employees double vaccinated, compared to the Argentine national figure of 73%. All workers travelling to the operations in
The Western Australian (“WA”) Government has also enforced mandatory third (booster) vaccinations for all fly-in fly-out and local workers on WA mine sites within one month of eligibility. Following the successful compliance of the previous two dose mandate, the Mt Cattlin team is on track to implement this and other controls that will be required.
Whilst the Company continues to actively plan for and manage COVID-19 impacts across its global operations, it is likely that the steep increases in Omicron-related COVID-19 cases globally will continue to impact the group’s operations and development activity in the near term.
Community and Shared Value Program
In compliance with the COVID-19 Bio-Security Protocol, community engagement and briefings continued throughout the quarter with various development initiatives including the Food Sovereignty Support Program that operates across six local communities and the Vicuna Sustainable Management Program. Sales de Jujuy received an award at the COAS supporters’ awards for the donation of X-ray equipment to the local Susques hospital. COAS is a not-for-profit organisation that supports the provision of health care in
Successful community consultation meetings were also undertaken in Catamarca during the quarter as part of the Sal de Vida environmental approval process.
OPERATIONS
MT CATTLIN
Spodumene concentrate
Ravensthorpe,
At Mt Cattlin, 52,225 dmt of spodumene concentrate at 5.7% Li2O grade was produced in the December quarter, bringing total CY21 production to 230,065 dmt, exceeding CY21 forecast production of 220,000 dmt (Table 1). This was predominantly due to a 10% increase in head grade and a slight increase to throughput.
Mining and processing
Mining activities during the quarter continued to source ore from the 2NE pit and pre-stripping activities also continue at the 2NW pit, with fresh ore expected to be exposed in Q1 CY22.
Recovery of 57% was lower quarter on quarter (“QoQ”) due to lower head grade compared to the previous quarters, however average recovery of 59% in CY21 is in line with full year guidance.
The ore sorters continue to make positive contributions to throughput from the stockpiles of low-grade ore. With a recent upgrade from optical ore sorters to laser ore sorters, contribution of low-grade ore increased from 18% in the September quarter, to 37% in the December quarter.
Sales and financial performance
38,071 dmt of spodumene concentrate was shipped during the quarter at an average grade of 5.7% Li2O, generating revenue of
The FOB unit cash cost of spodumene concentrate produced for the quarter was
Table 1: Mt Cattlin operational and sales performance against CY21 forecast production metrics
Metric | Units | CY21 Forecast | CY21 Actual | Dec Q | Sep Q | Jun Q | Mar Q | ||
Mining | |||||||||
Total material mined | bcm | 5,400,000 - 5,900,000 | 5,277,317 | 1,973,140 | 1,330,080 | 966,920 | 1,007,177 | ||
Ore mined | bcm | - | 650,505 | 142,730 | 195,285 | 174,358 | 138,132 | ||
Processing | |||||||||
Total ore processed | wmt | 1,450,000 - 1,650,000 | 1,598,590 | 430,867 | 429,395 | 427,587 | 310,741 | ||
Grade of ore processed | % Li2O | 1.2 - 1.3 | 1.40 | 1.23 | 1.48 | 1.44 | 1.47 | ||
Mass yield | % | - | 14.7 | 12.4 | 16.1 | 15.1 | 15.3 | ||
Recovery | % | 58 - 62 | 59.7 | 57.0 | 61.7 | 60.0 | 59.7 | ||
Concentrate produced | dmt | 210,000 - 220,000 | 230,065 | 52,225 | 67,931 | 63,321 | 46,588 | ||
Grade of concentrate produced | % Li2O | 5.6 - 5.8 | 5.7 | 5.7 | 5.7 | 5.7 | 5.8 | ||
Sales | |||||||||
Concentrate shipped | dmt | - | 206,127 | 38,071 | 89,640 | 48,499 | 29,917 | ||
Grade of concentrate shipped | % Li2O | - | 5.8 | 5.7 | 5.7 | 5.8 | 5.9 | ||
Realised price4 | US$/dmt CIF | 829 | 1,595 | 796 | 560 | 386 | |||
Revenue4 | US$ million | 171 | 60.7 | 71.4 | 27.1 | 11.6 | |||
Production Costs | |||||||||
Cash cost per tonne produced5 | US$/t FOB | 390 - 420 | 345 | 324 | 351 | 328 | 384 | ||
4 Revenue and realised price are stated on a CIF basis to be consistent with Statutory accounting practices. Prior periods have been adjusted to such basis. 5 Excluding marketing and royalties. |
FY22 production and sales outlook
In order to align with Allkem’s 30 June financial year end, forecast spodumene production for the 12-month period ending
Table 2: Mt Cattlin FY22 Production metrics
FY22 Forecast Production Metrics | Units | Forecast |
Total material mined | bcm | 6,800,000 - 7,200,000 |
Total ore processed | wmt | 1,700,000 - 1,800,000 |
Grade of ore processed | % Li2O | 1.1 - 1.2 |
Recovery | % | 55 - 59 |
Concentrate produced | dmt | 200,000 - 210,000 |
Grade of concentrate produced | % Li2O | 5.5 - 5.7 |
Cash cost per tonne produced6 | US$/t FOB | 400-430 |
6Excluding marketing and royalties |
The Company continues to experience very strong demand for its spodumene concentrate and lithium carbonate as supply side tightness persists in raw materials and throughout the battery supply chain. In addition to the 23kt January shipment noted above, contracting arrangements for an additional 45kt of spodumene concentrate in Q1 CY22 are well advanced with indicative pricing of
Resource drilling
OLAROZ LITHIUM FACILITY
Lithium Carbonate
Production
Production for the December quarter was 3,644 tonnes, up 30% QoQ and down 2% from the previous corresponding period (“PCP”). 51% of the quarter’s production was battery grade lithium carbonate, in line with production targets. The Olaroz operation will conduct a regular planned maintenance shutdown for eight days in February which will include tie-in´s to interconnect the expansion assets with the existing site facilities.
Sales and financial performance
Quarterly product sales of 3,293 tonnes of lithium carbonate included 65% of battery grade material, in line with customer requirements. The sales volume was up 26% QoQ but down 24% from the PCP, reflecting a decision in 2020 to reduce excess inventory at a time of significant market softness and uncertainty related to COVID-19.
Total sales revenue of
Pricing for this June half is anticipated to be approximately
Table 3: Olaroz production metrics
Metric | Units | Dec Q | Sep Q | QoQ % | PCP | PCP % | ||||
Production | tonnes | 3,644 | 2,802 | 30% | 3,727 | -2% | ||||
Sales | tonnes | 3,293 | 2,622 | 26% | 4,345 | -24% | ||||
Average price received | US$/tonne | 12,491 | 9,341 | 34% | 3,797 | 229% | ||||
Cash cost of goods sold7 | US$/tonne | 4,336 | 4,754 | -9% | 3,623 | 20% | ||||
Revenue | US$M | 41.1 | 24.5 | 68% | 17 | 149% | ||||
Gross cash margin | US$/tonne | 8,155 | 4,587 | 78% | 174 | 4587% | ||||
Gross cash margin | % | 65% | 49% | 16% | 0 | 61% | ||||
Export Tax | US$/tonne | 444 | 370 | 20% | 85 | 422% |
7 Excludes royalties, export tax and corporate costs
Cost and margins
Cash cost of goods sold for the quarter was
Gross cash margin for the quarter increased by 78% to
Expansion
Project Status
Construction activity at the Olaroz Stage 2 lithium facility is progressing well. Commissioning of ponds, brine distribution infrastructure and liming plants is occurring as individual project components are completed. First production is currently anticipated in H2 CY22, subject to any further COVID-19 related delays.
By the end of
As previously disclosed, COVID-19 impacts over the preceding two years have necessitated significant changes to operating protocols which have slowed activities and increased costs. These have included the installation of additional construction workforce accommodation to enable adherence to strict social distancing requirements. Changes have also been required to be made to transport arrangements and work practices have been modified to reduce interaction between teams.
A recent review of Olaroz expansion project capital expenditure, excluding VAT and working capital, indicates an expected 10-15% increase to between
The major areas of cost impact were in the lime plant, carbonation plant, soda ash facilities, costs related to drilling brine production wells and construction of additional camp facilities as mentioned above.
BORAX
Boron Minerals
Sales in Q2 FY22 of 12,828 tonnes of boron minerals and refined products represents a quarterly decrease of 2% and an approximate increase of 21% from the PCP (Table 4). Total sales revenue was down 5% QoQ due to a 3% decrease in the average realised price resulting from a change in product mix and lower sales volume. Revenue was up 25% from the PCP. The 12-month rolling TRIFR has improved from 8.3 in
Table 4: Borax Argentina sales volumes
CY2021 | Units | 2021 | QoQ % | 2020 | PCP % | ||
December | tonnes | 12,828 | -2% | 10,573 | 21% | ||
September | tonnes | 13,083 | 17% | 8,964 | 46% | ||
June | tonnes | 11,188 | 9% | 12,278 | -9% | ||
March | tonnes | 10,282 | 24% | 10,690 | -4% |
DEVELOPMENT PROJECTS
NARAHA
Lithium Hydroxide
Naraha,
Construction of the Naraha lithium hydroxide plant in
Lithium Carbonate
Piloting activities
The onsite piloting program continued to deliver positive results. The most recent pilot run achieved its objectives to assess new instrumentation and equipment and accomplish continuous softening-IX-crystallisation operation at optimised conditions. Pilot pond operations are also underway to validate and refine the design model for commercial scale operations through maintenance, testing and harvesting trials. Piloting activities will continue in CY22 for training purposes to support operational readiness for Stage 1 production.
Wellfield drilling and early construction
Pump testing has been performed by the hydrogeological team on all eight production wells and results are in line with operating assumptions and expectations. A revised Resource & Reserve estimate is planned after final assessment of the drill program.
General infrastructure and early works progressed onsite during the quarter. Infrastructure materials have arrived at site for the construction camp and the lay down areas have been prepared and completed. A public road by-pass was also completed allowing the earthworks for the ponds to commence.
Engineering and procurement
Engineering is progressing well and is largely complete for the ponds to wellfields and process plant and non-process infrastructure. Procurement for long lead items is also well advanced.
Liners for the evaporation ponds have been delivered to site and the earthworks and liner contractor has mobilised to site.
Project execution
With final environmental permits now received from the Provincial Government, construction of ponds and the brine distribution network will commence in
A royalty agreement with the Catamarca Provincial Government has now been executed which confirms a life of project royalty rate at 3.5% of net sales revenue (revenue less taxes). Due to permitting and COVID-19 related delays, the Stage 1 construction schedule has been impacted and commissioning and first production is now expected by H2 CY23.
Spodumene Concentrate
Feasibility Study
The Feasibility Study and Maiden Ore Reserve, released on
The Study demonstrates lowest quartile development capital costs of
Project execution
- Further engineering activities to finalise design, equipment and plant configuration;
- Procurement of equipment, temporary installations and key contracts;
- Development of sustaining initiatives for local stakeholders; and
- Progression of the Environmental and Social Impact Assessment (“ESIA”), Impact and Benefit Agreement (“IBA”) and regulatory approvals.
Project status
Basic engineering has commenced alongside the procurement process and preparation of construction permits for early works is underway. Basic engineering for the process plant has progressed as planned and is expected to move directly to detailed engineering upon completion in
Additional site investigation works are underway with respect to sterilisation drilling (for the final plant and infrastructure location) and further resource definition. The first drill rig mobilised to site in early January and drilling of the first hole has commenced.
The ESIA was re-submitted to authorities in
Under the Cree Nations process, the IBA is aligned with the Feasibility Study / NI 43-101 report and as such the completion and release of the Feasibility Study will allow the IBA discussion to be progressed to completion.
LITHIUM MARKET
Demand
The strong demand for lithium chemicals and spodumene concentrate experienced throughout 2021 accelerated further during the December quarter in response to record production volumes of lithium-ion battery materials and batteries in
Electric Vehicle (“EV”) sales in 2021 were estimated at ~6.2 million units, up ~100% compared to the prior year. Approximately 2 million EVs were sold in the December quarter, which represents a ~40% increase compared to the PCP and a ~13% increase QoQ. EV sales in
With EV sales anticipated to increase substantially in 2022, production volumes of lithium-ion batteries ramped up in
Demand for lithium carbonate in
Spot prices for lithium carbonate and hydroxide across all key geographies rallied to new records as limited uncommitted supply fell short of demand during the quarter. Spodumene concentrate spot prices also reached record highs during the quarter, almost doubling from the previous quarter.
Contracted prices were gradually adjusted upwards to reflect tightening market conditions across the supply chain.
Lithium chemicals and spodumene concentrate have historically been largely sold under annual and long-term contracts. Reported spot prices reflect marginal volumes rather than prices in the high-volume contract market.
Allkem’s sales volumes of lithium carbonate and spodumene concentrate throughout CY21, have been mostly to customers with supply contracts of 1–3 year tenure. Pricing for spodumene concentrate contracts are negotiated on a quarterly basis with long term customers. Pricing for lithium carbonate contracts during CY21 were approximately 1/3 linked to average monthly spot indices, 1/3 with annual fixed price agreed in late 2020, and 1/3 linked to contract indices with quarterly adjustments. In 2022, annual contracts that previously had a fixed price will be linked to contract indices with an average of bi-monthly adjustments.
Supply
Chinese lithium chemical production sourced from spodumene increased by ~5% QoQ due to higher spodumene volumes shipped from
Competition for securing lithium resources intensified during the quarter as new investors entered the sector resulting in upstream acquisitions at record resource multiples. It’s anticipated that lithium-ion battery producers and EV manufacturers will continue to play a more active role in sourcing lithium chemicals and spodumene concentrate in 2022 through direct investments and long-term purchase agreements.
CORPORATE & FINANCIALS
Annual General Meeting
The Annual General Meeting (“AGM”) was held virtually on Tuesday
Change of company name and ASX ticker
Following shareholder approval at the AGM, the change of company name from
Financial position
At
Mt Cattlin contributed
The official foreign exchange rate depreciated against the US dollar by 4% in the December quarter from AR$98.74 at
December inflation was 3.8% and an aggregate of ~10% in the quarter. Inflation for the 12-month period from
This release was authorised by Mr
ABN 31 112 589 910 Level 35, | Investor Relations & Media Enquiries +61 418 783 701 Andrew.Barber@allkem.co | Connect info@allkem.co +61 7 3064 3600 www.allkem.co |
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IMPORTANT NOTICES
This investor ASX/TSX release (Release) contains general information about the Company as at the date of this Release. The information in this Release should not be considered to be comprehensive or to comprise all of the material which a shareholder or potential investor in the Company may require in order to determine whether to deal in Shares of
Forward Looking Statements
Forward-looking statements are based on current expectations and beliefs and, by their nature, are subject to a number of known and unknown risks and uncertainties that could cause the actual results, performances and achievements to differ materially from any expected future results, performances or achievements expressed or implied by such forward-looking statements, including but not limited to, the risk of further changes in government regulations, policies or legislation; the risks associated with the continued implementation of the merger between the Company and Galaxy Resources Ltd, risks that further funding may be required, but unavailable, for the ongoing development of the Company’s projects; fluctuations or decreases in commodity prices; uncertainty in the estimation, economic viability, recoverability and processing of mineral resources; risks associated with development of the Company Projects; unexpected capital or operating cost increases; uncertainty of meeting anticipated program milestones at the Company’s Projects; risks associated with investment in publicly listed companies, such as the Company; and risks associated with general economic conditions.
Subject to any continuing obligation under applicable law or relevant listing rules of the ASX, the Company disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements in this Release to reflect any change in expectations in relation to any forward-looking statements or any change in events, conditions or circumstances on which any such statements are based. Nothing in this Release shall under any circumstances (including by reason of this Release remaining available and not being superseded or replaced by any other Release or publication with respect to the subject matter of this Release), create an implication that there has been no change in the affairs of the Company since the date of this Release.
Not for release or distribution in the
This announcement has been prepared for publication in
Competent Person Statement
Any information in this Presentation that relates to James Bay Mineral Resources and Ore Reserves is extracted from the ASX announcement, entitled “James Bay Lithium Project – Feasibility Study & Maiden Ore Reserve” dated
Any information in this Presentation relating to a production target or forecast financial information derived from a production target is extracted from the ASX Announcement entitled “James Bay Lithium Project – Feasibility Study & Maiden Ore Reserve” dated
Any scientific and technical information relating to the Company’s
Source:
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