Orocobre, Galaxy merger completed, creating 5th-largest lithium producer Allkem

Lithium producers Orocobre and Galaxy Resources have completed their merger, creating Allkem, the fifth-largest lithium producer globally.

The companies announced Aug. 25 that the merger had been implemented, with all Galaxy shares transferred to Orocobre and eligible Galaxy shareholders being issued 0.569 Orocobre shares for each

Galaxy share held.

They said the 292.6 million newly issued Orocobre shares were expected to start trading on Australian Securities Exchange from Aug. 26, while they had applied for Galaxy to be delisted from the ASX on the same day.

The merger was first announced in April and was approved by galaxy shareholders on Aug. 13.

Orocobre Managing Director and CEO Martin Perez de Solay said in the company's FY2021 results that the merged company would be rebranded as Allkem, subject to shareholder approval.

"With the merger we will go further in our commitment to delivering the lithium chemicals that the world increasingly needs to mitigate climate change and carbon emissions," Perez de Solay said.

He added that the merger consolidated the combined group's position in Argentina -- where it would be headquartered -- and provided an opportunity to build on a strong platform there and in other key areas, including Australia, Japan and North America.

In Argentina, Orocobre has completed around 60% of the Olaroz lithium carbonate plant expansion from 25,000 mt/year to 42,500 mt/year, while Galaxy has been developing the first stage of the Sal de Vida lithium brine project to produce around 32,000 mt/year of lithium carbonate.

Orocobre said the 10,000 mt/year Naraha battery-grade lithium hydroxide plant project in Japan was nearing completion, which would allow it to convert Olaroz lithium carbonate into battery-grade hydroxide.

Allkem will also operate Galaxy's Mt Cattlin operation in Western Australia, which produces around 200,000 mt/year of spodumene concentrate.

The group is also advancing permitting approvals at Galaxy's James Bay hard rock lithium project in Canada.

Orocobre lithium production up on-year

Orocobre produced 12,611 mt of lithium carbonate for the financial year ended June 30, up 6% year on year, despite COVID-19 disruptions, of which battery grade lithium carbonate production accounted for 48% of total production, up from 24% in FY2020.

Sales for the year also rose 27% on the year to 13,319 mt, at an average FOB price of $4,983/mt, which was down from $5,520/mt in FY2020.

"Our operating strategy retains a focus on safety, quality and productivity which combined with disciplined cost management will deliver further improved operating results ensuring we remain a low-cost producer of lithium carbonate," Perez de Solay said.

Orocobre said robust demand for lithium in China continued to push up global prices and recent reported spot sales for spodumene had realized prices of over $1,000/mt.

The S&P Global Platts price of spodumene concentrate with 6% lithium oxide content (SC6) was assessed at $1,300/mt FOB Australia on Aug. 20, up 183% since the start of 2021.

The producer said there were also increasing long-term contracts between OEMs and lithium producers to secure supply availability ahead of expected strong demand growth.

It said EV demand was forecast to rise around 20-30% CAGR in the coming decade, with around 3.5 million units forecast to be sold globally in H2 2021.

According to Platts Analytics, sales of plug-in light duty EVs in China are expected to rise to 4.4 million units in 2025, up from 1.2 million units in 2020, increasing to 9.7 million units in 2030 and 16.8 million units in 2035.

Orocobre said that delivery of new supply was critical to meeting oncoming demand, with a structural deficit from 2021 onwards expected due to absence of significant supply-side developments.

"Market tightness and price momentum is evident with strong pricing required to provide required supply," it said.

Lithium prices have been on the rise in recent months, with the Platts assessment for seaborne lithium carbonate up 136% from the start of the year to $15,000/mt CIF North Asia on Aug. 25. Similarly, seaborne lithium, hydroxide prices have also doubled over the same period to $18,000/mt CIF NA.