What is driving the Allkem share price higher today?

The lithium miner's shares are having a decent session thanks to an update.

| More on:
a young woman raises her hands in joyful celebration as she sits at her computer in a home environment.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Allkem Ltd (ASX: AKE) share price is on course to end the week with a decent gain.

In afternoon trade, the lithium miner's shares are up 2% to $15.91.

Why is the Allkem share price rising?

As well as getting a lift from a decent night of trade for lithium shares on Wall Street, investors have responded positively to the release of an announcement today.

In respect to the latter, Allkem has released an ore reserve update for its Mt Cattlin operation in Western Australia.

According to the release, the ore reserve tonnage at Mt Cattlin has increased 34% to 7.8Mt at 1.20% lithium oxide (Li2O) and 130ppm Tantalum pentoxide at a cut-off grade of 0.4% Li2O.

Management highlights that this ore reserve and its planned mining schedule suggests a projected life-of-mine (LOM) for the next 4-5 years (2027-2028) via open pit mining methods.

What's next?

Allkem advised that the next mining stage (Stage 4) consists of two separate cutbacks (Stage 4-1 and 4-2) to optimise ore presentation.

A mining proposal for Stage 4 has been submitted to regulators and is anticipated to be received by the end of 2023. The board has approved mining of the first cutback (Stage 4-1) of the open pit, which will result in continued spodumene production into 2026.

After which, with the second cutback (Stage 4-2), the company sees significant opportunity in transitioning to an underground mine including the unlocking of greater orebody extension potential and prolonging the life of mine. An underground feasibility study is expected to be delivered by Q1 2024.

Operating cash costs for the LOM are estimated at US$935/dmt produced. This incorporates the remainder of the current Stage 3 open pit, Stage 4 open pits, and processing of end-of-life stockpiles from 1 April 2023 to end of mine life.

Based on this and its lithium price assumptions, Stage 4 is forecast to generate a net present value of US$1.2 billion or A$1.7 billion. This is a great result considering it will only require minor initial capital expenditure to support the Stage 4 expansion.

Overall, this is positive for the company and it's not a surprise to see the Allkem share price rise on the news.

Motley Fool contributor James Mickleboro has positions in Allkem. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Materials Shares

Image of young successful engineer, with blueprints, notepad and digital tablet, observing the project implementation on construction site and in mine.
Materials Shares

Forget Fortescue and buy this ASX mining stock for a 30%+ return

Goldman Sachs thinks this miner is a far better option for investors seeking iron ore exposure.

Read more »

Man with his hand on his face looking at a falling share price chart on a tablet.
Materials Shares

Is the beaten down Mineral Resources share price a bargain buy now?

Let's see what Bell Potter is saying about the miner after Monday's selloff.

Read more »

two men in hard hats and high visibility jackets look together at a laptop screen that one of the men in holding at a mine site.
Materials Shares

Why did the Core Lithium share price hit a wall in October?

The Core Lithium share price rally came to an abrupt end in October. But why?

Read more »

Businessman walking down staircase with suitcase, at sunrise
Materials Shares

Mineral Resources shares sink 7% on CEO exit and 'major actions'

This mining company's CEO is leaving following a scandal.

Read more »

A man wearing glasses and a white t-shirt pumps his fists in the air looking excited and happy about the rising OBX share price
Materials Shares

Why this ASX lithium stock almost doubled in value in October

This lithium miner made its shareholders smile last month. But why?

Read more »

A woman jumps for joy with a rocket drawn on the wall behind her.
Materials Shares

Guess which ASX All Ords stock just rocketed 80%

What is getting investors excited about this stock today? Let's find out.

Read more »

two businessmen shake hands in a close up mid-level shot with other businesspeople looking on approvingly in the background.
Materials Shares

Core Lithium share price higher on 'invaluable' ex-Rio Tinto appointment

The lithium miner has made a new addition

Read more »

Two male ASX 200 analysts stand in an office looking at various computer screens showing share prices
Materials Shares

Here's what this leading broker is saying about Pilbara Minerals shares

Is now a good time to buy this lithium miner? Let's see what this broker is saying.

Read more »