Allkem Limited (AKE: ASX) is a lithium producer and developer with a global portfolio of projects, both developing and in production. Formerly known as Orocobre limited, it is the product of a merger between Orocobre and Galaxy Resources, becoming a significant global producer of lithium. It has become one of the most successful lithium producers in the world, having merged a successful lithium brine operation in Northern Argentina (Olaroz) with a hard rock asset in Western Australia (Mt Cattlin). Both operations in the FY23 result were highly profitable, forming a strong global portfolio for lithium.
The company has a strong balance sheet, whilst not paying dividends, Allkem limited chooses to reinvest that money into its projects, with enough profit to be able to fund its own projects entirely, without having to raise capital or dilute shares prices. It has continued to be a strong performer and has good potential for growth.
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Allkem limited currently has 5 bases of operation around the world. Olaroz, Sal de Vida and Cauchari are the basis of lithium brine production in Argentina, with Mt Cattlin being its only hard rock lithium currently producing project, based in Western Australia. Allkem ltd have also started a joint venture with the Toyota Tsusho corporation resulting in the construction of the Naraha Lithium hydroxide conversion facility in Japan, with AKE owning 25%, and providing the feedstock from Olaroz.
Allkem limited have started exploring a new potential hard rock mine, the James Bay project, in Canada. The canadian operations are set to further diversify Allkem's holdings and provide a new source of hard rock lithium within the company. The James bay resource has recently been upgraded to 110.2m Tonnes at 1.30Li20.
Potential Corporate Merger with Livent (NYSE: LTHM)
The proposed merger with Livent Corporation (NYSE: LTHM) has the potential to accelerate growth and regulatory submissions are progressing, which includes an AKE shareholder meeting to vote on the merger later this year. Both companies have already announced a new board of directors for the new company, with Managing director Martin Perez de Solay, set to step down afterwards.
Livent has advanced processing technology, which will allow lithium products from the Allkem stable to be delivered further down the value chain, optimising margins and cash flow. The combined group will also synergise between its operations and projects in Argentina and have better cash generation to fund its growth projects.
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