Allkem and Livent to focus on scale over dividends as Arcadium Lithium merger approaches
\nDespite growth options in Canada and Argentina, Allkem is likely to maintain a presence in the hot WA lithium market
\nWA1 soars again on high grade niobium results from its Luni carbonatite<\/p>\n
It\u2019s the only one of Australia\u2019s three major lithium names not paying out cash returns to shareholders despite strong profits from recently booming lithium prices and margins in the order of 90%.<\/p>\n
And Allkem (ASX:AKE)<\/a> chairman Peter Coleman, formerly the head honcho at Woodside, says that anomaly is likely to continue after a multi-billion dollar merger with US lithium stock Livent.<\/p>\n He says the company, which will be rebadged as Arcadium Lithium and run by Livent CEO Paul Graves, is in a growth phase.<\/p>\n It\u2019s the biggest hint the miner, which operates brine assets in Argentina and the Mt Cattlin lithium mine in WA, is taking a view that growing production for a long term lithium demand boom is its priority.<\/p>\n With Livent\u2019s El Fenix DLE operations in Argentina in the family, the company (which will be 56-44 split between the holders of Allkem and Livent) plans to become the world\u2019s third largest lithium producer by 2028 behind Albemarle and SQM.<\/p>\n It global portfolio, which will include Mt Cattlin, the Olaroz, El Fenix, Sal de Vida and Cauchari brines in Argentina, James Bay and Whabouchi hard rock mines in Quebec and Naraha lithium hydroxide plant in Japan, will eventually produce 248,000t of lithium carbonate equivalent tonnes a year.<\/p>\n Heading into the merger \u2014 due for a shareholder vote next month \u2014 Coleman told investors at the $6 billion lithium giant\u2019s AGM in Perth today both Allkem and Livent were in a \u2018growth phase\u2019.<\/p>\n AKE doesn\u2019t pay dividends, putting it at odds with peers Pilbara Minerals (ASX:PLS)<\/a>, Mineral Resources (ASX:MIN)<\/a> and IGO (ASX:IGO)<\/a>, though the latter two were paying dividends on iron ore, mining services, gold and nickel earnings previously.<\/p>\n \u201cDespite having very robust financial results for the financial year ended in June 30 of this year, we believe the optimal way to maximise shareholder value and returns is to execute our strategy on delivering business critical scale to customers to strengthen our position as a global leader and supplier of choice of lithium chemicals,\u201d Coleman said.<\/p>\n \u201cNow the assets in our portfolio have considerable capital expenditure requirements, but are expected to generate very robust returns in the mid to longer term. Having said that the board continues to assess the appropriate time to issue dividends without compromising our growth strategy.\u201d<\/p>\n That\u2019s unlikely to change when Allkem \u2014 the result of a merger in 2021 between Orocobre and Galaxy Resources \u2014 joins in holy matrimony with Livent.<\/p>\n \u201cWith respect to the MergeCo, we don\u2019t anticipate there\u2019ll be dividends, at least in the short to medium term. Again Livent has a growth profile, not too dissimilar to Allkem\u2019s,\u201d Coleman said.<\/p>\n \u201cLivent is not currently paying a dividend to shareholders and neither is Allkem, so we don\u2019t foresee a change in that policy. But of course, the MergeCo board will need to make that decision when we get together.\u201d<\/p>\n \u00a0<\/p>\n <\/span>\u00a0<\/p>\n \u00a0<\/p>\n The jostling for position in WA\u2019s dominant hard rock lithium scene has been a major talking point in recent weeks and days, with Gina Rinehart and Chris Ellison building stakes in just about anything that isn\u2019t pinned down.<\/p>\n In the cases of Azure Minerals (ASX:AZS) <\/a>and Liontown Resources (ASX:LTR)<\/a> one or both look to have effectively blocked takeovers from the world\u2019s two biggest producers SQM and Albemarle.<\/p>\n Allkem and Livent are bigger dogs and haven\u2019t yet seen any threat emerge to their long proposed merger from outside \u2014 indeed the Mt Cattlin mine, while operating, is smaller in scale and mine life than the resources Ellison and Rinehart have been targeting.<\/p>\n With its enlarged scale Arcadium \u2014 which is facing up to that short Mt Cattlin lifespan \u2014 could be another entrant into the battle for WA\u2019s lithium riches.<\/p>\n Flanked by outgoing CEO Martin Perez de Solay, Coleman said he couldn\u2019t comment on whether a player like Hancock could come in to scupper the deal, and hinted it would look at opportunities to grow the WA business despite its shorter mine life compared to the company\u2019s Argentine and Canadian deposits.<\/p>\n \u201cWestern Australia is clearly one of the areas where we\u2019re very happy that we\u2019ve got a very good operating business and we continue to look for opportunities to extend or expand that operating business, and as Martin said the board\u2019s already approved extension of that business and we look for opportunities to grow that business as well,\u201d he said.<\/p>\n \u201cWith respect to what\u2019s happening in the marketplace. I think it just simply to be honest with you validates that others are taking a long term view of lithium as well. <\/p>\n \u201cAnd as I mentioned, in our view, current equity prices don\u2019t reflect the long term value of the shares in the company and of course of many companies in the sector. <\/p>\n \u201cSo people are being opportunistic at the moment now as equity prices are lower with the view that they can develop assets in a longer term and take advantage of that.\u201d<\/p>\n \u00a0<\/p>\n One of the stocks of the year, WA1 Resources (ASX:WA1)<\/a> is ever so close to nabbing a spot in our New Monster<\/a> list for the end of 2023.<\/p>\n Sitting at a 16.58% gain today the $460 million niobium play is sitting on a $462 million market cap, up a tidy 585% YTD.<\/p>\n Its latest run has come from a string of high grade assays, ranging up to 30m at 4.7% niobium pentoxide from just 54m at the Luni carbonatite discovery in WA\u2019s West Arunta region.<\/p>\n It comes ahead of a maiden resource for what promises to be one of the world\u2019s highest grade niobium discoveries in the first half of 2024. Luni is looming as a globally critical project, given its potential to break into a virtual monopoly held by the world\u2019s largest and highest grade producer, Brazil\u2019s CBMM.<\/p>\n Around 90% of the 100,000tpa niobium feeds into steel production, but increasingly it is being prized for its use in lithium ion battery technology, where Nb2O5 can reduce charge times and extend battery life.<\/p>\n It was a major standout as the materials sector tumbled over 1%, led by a drop for the Pilbara iron ore miners.<\/p>\n \u00a0<\/p>\n <\/span>\u00a0 The post Monsters of Rock: Allkem flags growth over dividends ahead of Livent merger<\/a> appeared first on Stockhead<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"Allkem (ASX:AKE) share price today<\/h2>\n\n
Joining WA\u2019s game of thrones<\/h2>\n
WA1 shoots up for near 600% gain<\/h2>\n
WA1 Resources (ASX:WA1) share price today<\/h2>\n\n
\n<\/span><\/p>\n