Allkem and Livent, two lithium companies, are set to merge and form the world’s third-largest miner of lithium, a key metal used in batteries that power electric vehicles and high-tech devices.
This all-share merger creates a new company with a valuation of US$10.6 billion and a projected production capacity of 248,000 tonnes of lithium carbonate equivalent (LCE) per year.
The merger represents about 7% of global mine production in 2023, making it one of the top five lithium producers in terms of market capitalization.
Complementary Assets and Growth Projects
Allkem produces lithium carbonate from its Sal de Vida mine in Argentina, while Livent has brine production in Argentina and a hard-rock-based lithium project in Canada, as well as lithium refineries in the US and China. By combining their highly complementary range of assets, growth projects, and operating skills across extraction and processing under a vertically integrated business model, the new company can effectively scale and expand production to meet customers’ rapidly growing demand for lithium chemicals.
Leadership and Governance
The merger will be led by Livent’s CEO, Paul Graves, who will take the top job at the new entity. Allkem’s director, Peter Coleman, will become the chairman. However, no role has been announced for Allkem’s CEO Martín Pérez de Solay. The company, to be based in North America, will be primarily listed on the New York Stock Exchange and seek inclusion on Australia’s benchmark S&P/ASX 200 in-dex.
Shareholder Equity and Market Capitalization
As part of the “merger of equals”, Allkem shareholders will take 56% of the company, while Livent shareholders will own 44%. With a projected production capacity of 248,000 tonnes of lithium carbonate equivalent (LCE) per year, the new company will be one of the largest and most resilient lithium producers globally by the end of the decade.
Expansion Plans
Livent has previously talked about plans to expand offshore to meet surging demand from electric vehicle makers, saying that it was assessing lithium assets in Canada and other countries to boost its capacity. Allkem, on the other hand, generates the lion’s share of its profit from its Mt Cattlin mine in Western Australia but has flagged growth plans in Argentina and at the James Bay spodumene project in Canada.
Synergies and Sharing of Know-How
The consolidation also enables the sharing of know-how, such as Livent’s Direct Lithium Extraction (DLE) production, which it has used for 15 to 20 years. Allkem’s brine operations will now be able to benefit from this, while Livent’s interest in Nemaska Lithium will be able to benefit from Allkem’s hard rock expertise.
Industry Consolidation and Takeover Approaches
The wave of deals in the lithium sector comes as prices of the battery metal fell by more than 50% to US$24,000 per tonne in April, on weak demand from the Chinese EV sector, according to Benchmark Mineral Intelligence. Prices have recovered over the past few weeks and are now above US$26,000 a tonne.
Australian lithium miners have been fending off takeover approaches this year, with Liontown Re-sources rejecting a US$3.7 billion (A$5.5bn) buyout bid from Albemarle and turning down two previous offers by the US producer since.