Mining companies Livent and Allkem announced their merger with plans to become by 2027 the third largest producer of lithium, the mineral used in the manufacture of rechargeable electric batteries. Regard a strong change in the geopolitics of the sector given that a colossus will be born that will compete with Chinese mining companies.
The name of the new company is not yet known, but will be valued at $10.6 billion. Philadelphia, the US Livent and the Australian Allkem intend to close the deal by the end of the year and create a “merger of equals” in which Livent will have 44% of the new company and the Australian company the remaining 56%. as announced.
The protagonists of the merger – considered the seventh and eighth world producer – are present in the Argentine market, which is – in turn – the fourth world producer. For this reason, the press release mentions the Argentina and Canada as the places where the fruits of the union will be seen most quickly. In both countries, they expect production to account for around 7% of global supply in 2023.
Both miners aim to become a global leader in lithium chemicals, “with 2022 combined pro forma revenue of approximately $1.9 billion and adjusted EBITDA (gross profit) of approximately $1.2 billion,” under the terms of the agreement.
The reasons for the merger
Factors driving the merger include the growing demand of electric vehicles, in addition to that already supported in cell phones and energy storage equipment that make the lithium market one of the most thriving in the mining world.
Another business union issue has to do with the decline in the price of lithium carbonate, globally. In this sense, the merger would give the possibility to expand the production capacity of the companies instead of developing new projects from scratch.
The price of lithium collapsed by 70% between November last year and April this year, although it has recovered in recent weeks and it’s now over $26,000 a ton.
Also, the Livent-Allkem combination will allow miners share production methods such as direct lithium mining or DLE: a process that aims to speed up production and reduce water consumption.
“As a combined company, we will have the scale, product range, geographic reach and execution capabilities enhanced to meet our customers’ growing lithium demand,” said Paul Graves, Livent’s new chief executive officer. Allkem’s CEO, Martín Pérez de Solay, will provide consulting services to facilitate the integration.
Allkem has operations in Australia, Argentina and Canada and Livent has the production of brine Argentina, a lithium-based design Quebec AND lithium refineries in the United States and China. The company also has a supply agreement with automaker BMW.
The key to enter the United States
It is estimated that the agreement between the mining companies it may have been partly led by the United States. It happens that, in the inflation reduction law of that country, it is specified that a certain percentage of minerals in the batteries that electric cars carry must be mined or processed in countries that have free trade agreements with the United States, like Canada.
But how, There is no such agreement with Argentina. both US companies and the Argentine ambassador there, Jorge Arguello, They are trying to get Argentina to access those same benefits.
A month ago also the secretary of mines Fernanda Avila received Wendy Sherman, US Deputy Secretary of State, with which he spoke of the possibility that Argentina could supply the North American market with the supplies that abound in the so-called “lithium triangle” in the Argentine NOA.
Source: Clarin
