Allkem share price lights up amid first production milestone

This lithium giant is one step closer to producing a boatload more lithium carbonate.

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Key points

  • The Allkem share is bright green on an otherwise red day for ASX materials shares
  • Shares in the speciality lithium chemicals company are up 2.02% to $16.64
  • Allkem has successfully produced lithium concentrate for the first time at Olaroz Stage 2

The Allkem Ltd (ASX: AKE) share price is gaining traction on Tuesday following an announcement.

In the first hour of trading, shares in one of the largest lithium producers on the ASX are up 2% to $16.63. Meanwhile, the S&P/ASX 200 Index (ASX: XJO) is slipping 0.19% into the red as mining companies anchor the benchmark.

Why is the Allkem share price in the green?

Unlike many of its fellow materials constituents, Allkem is enjoying a positive reception today after publishing news regarding its Olaroz lithium facility in Northern Argentina.

According to the announcement, the speciality lithium chemicals company has successfully achieved its first production at Stage 2 of its Olaroz lithium facility. This expands upon the facility's first stage, producing high-grade lithium carbonate since 2014.

The second stage Olaroz development can produce 25,000 tonnes of technical-grade lithium carbonate per year. For context, the Argentina brine operation delivered a total of 12,863 tonnes of lithium in FY22.

Reaching 99.5% mechanical completion, the team will now be working on completing commissioning, increasing production volumes and product quality.

This ramp-up period is expected to span 12 to 18 months. Once completed, Olaroz Stage 1 and 2 will have a combined nameplate capacity of around 42,500 tonnes per annum. This would equate to roughly US$1.82 billion in potential annual revenue based on the current lithium carbonate price.

Allkem managing director and CEO Martin Perez de Solay commented on the achievement, stating:

We are very proud to have achieved the milestone of first production at Olaroz Stage 2 proving the operational viability of the carbonation process. The successful expansion of Olarozreflects our growth strategy and commitment to ensure long-term social and economic sustainability of our business for customers and stakeholders.

Up to 9,5000 tonnes per annum of lithium carbonate from Olaroz Stage 2 will be used as feedstock at the Naraha lithium hydroxide plant. Recently commissioned in Japan, the plant is owned as part of a joint venture between Allkem and Tsusho Corporation.

What else?

As previously covered by The Motley Fool, analysts remain bullish on the Allkem share price. Last month, both Macquarie and Bell Potter held positive ratings on the lithium company's shares.

The two brokers hold price targets of $17.40 and $19.20, respectively. Even after today's share price gain, these price targets would suggest further upside is still possibly on the table.

Finally, investors can expect to see Allkem hand down its next quarterly results on 27 July.

Motley Fool contributor Mitchell Lawler has positions in Macquarie Group. 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 positions in and has recommended Macquarie Group. 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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