What is driving the Allkem share price higher today?

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

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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.

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