The Allkem Ltd (ASX: AKE) share price is tumbling on Thursday morning.
In early trade, the lithium miner's shares are down 6% to $14.05.
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Why is the Allkem share price tumbling?
Investors have been selling down the Allkem share price this morning following the release of the company's first quarter update.
For the three months ended 30 September, Allkem delivered group revenue of US$298 million and a cash margin of approximately US$244 million.
This was driven by Olaroz lithium carbonate sales of 3,721 tonnes, generating record quarterly revenue of ~US$150 million with a gross cash margin of 89%, and shipments of 21,215 tonnes of Mt Cattlin spodumene, generating revenue of US$106.7 million with a gross cash margin of 80%.
In respect to its lithium carbonate, management advised that excluding shipments to Naraha, third party sales for the quarter averaged US$43,237 per tonne FOB. Whereas its Mt Cattlin spodemene commanded a price of US$5,028 per tonne CIF for SC 5.4%.
An additional US$35 million of revenue was generated from sales of 59,326 tonnes of low grade spodumene concentrate from pre-existing stockpiles and processing of fine-grained spodumene ore
Where are prices going?
The good news for lithium investors is that Allkem believes that lithium carbonate prices are going higher in the next quarter. It advised:
The lithium carbonate sales price to third party customers for the December quarter is expected to be approximately US$50,000/tonne. After accounting for actual pricing in the September quarter this remains in line with previous guidance of US$47,000/tonne for H1 FY23.
Things aren't quite as positive for spodumene, with management expecting pricing to be "in line with the September quarter." Though, this puts it on track to achieve its previous guidance of US$5,000 per tonne for the half.
Costs rising
One negative from the update was news that costs at its Mt Cattlin operation are increasing. After recording a cash cost of US$796 per tonne in the last quarter, its costs are expected to rise 13% to US$900 per tonne for the full year.
This reflects "the current operating environment and mitigation actions, ongoing development of the 2NW pit, lower ore grades of 0.93-0.94% and the associated metrics."
Though, with a price of US$5,000 per tonne being commanded for its spodumene at present, it still has very high margins.
Management also warned that its other projects could be impacted by cost pressures. It said:
Capital expenditure for James Bay and Sal de Vida remain subject to the same cost pressures that all resource projects are experiencing globally. Allkem will continue to review and monitor the capital cost budgets for all its projects as they progress.
It appears that this could be putting a bit of pressure on the Allkem share price today.
