Livent and Allkem merger to create $10.6 billion lithium producer

US lithium producer Livent and Australia’s Allkem said they had agreed to merge, creating a $10.6 billion producer that will target large automotive companies and look to accelerate supply growth in Canada and Argentina.

The merger will allow the combined company to “serve customers with a more resilient supply chain” and accelerate growth plans already underway, Livent said.

At a market capitalisation of $10.6 billion it would be the fifth largest lithium producer, behind Albemarle, SQM, Tianqi Lithium and Ganfeng Lithium.

“As a combined company, we will have the enhanced scale, product range, geographic coverage, and execution capabilities to meet our customers’ rapidly growing demand for lithium chemicals,” Paul Graves, chief executive of Livent, who will be CEO of the combined company, said.

The deal creates a third large Western lithium producer at a time when governments in Europe and the US are looking to localise the battery supply chain to reduce reliance on China.

With mining and processing projects in Canada, Australia, Argentina and Japan, the combined company will better be able to meet those goals, executives said, by reducing the risks of developing new projects.

It gives the company “more clout with customers, bigger contracts, bigger deals, more pricing power, more clout against Chinese competitors especially,” Simon Moores, chief executive of Benchmark, said.

Graves said a larger, vertically integrated company would allow the combined company to better supply large automotive companies.

“That scale … is really where the conversation changes with customers,” Graves said. “It gives them more security of supply, no matter which way you measure it.”

The deal comes as lithium prices start to recover after more than halving this year. Lithium carbonate prices in China have fallen by 63% this year to an average of RMB 197,500/tonne ($28,488), according to Benchmark’s Lithium Price Assessment.

They rose by 7% between the 3 and 10 May, according to Benchmark’s latest price assessment.

Still, the sentiment has impacted the share prices of the largest lithium companies, which have all fallen around 10% year-to-date.

Allkem and Livent said that the combined entity would have adjusted earnings before interest, tax and other items (EBITDA) of around $1.2 billion.

That compares with Albemarle’s adjusted EBITDA of $1.2 billion for its lithium business in 2022.

The two companies will have enough production capacity to produce 90,000 tonnes LCE this year and 250,000 LCE by 2027, they said. That would make them the third largest producer by 2027.

Combining lithium assets

The deal combines both companies’ operating brine projects in Argentina and also their projects under construction in Quebec, Canada.

Livent’s Hombre Muerto and Allkem’s Olaroz operations in Argentina will produce 32kt tonnes LCE and 20.5kt LCE respectively in 2023, following the completion of advanced stage expansion projects, according to Benchmark’s Lithium Forecast.

Allkem said that it could use Livent’s expertise in Direct Lithium Extraction (DLE) on its own brine projects, while Livent said Allkem had experience in conventional processing, via its Mt Cattlin spodumene mine.

“We think there’s good opportunity to cross-fertilise both operations with what we know,” Martín Pérez de Solay, chief executive of Allkem, said. “We see high complementarity between both businesses and the knowledge.”

Accelerating new projects

The deal gives the combined company new sources of lithium production and processing capacity.

Graves said the deal would accelerate the delivery of new projects and “reduce the risk” of developing them.

Allkem is developing the James Bay spodumene project in Quebec and is also building a lithium hydroxide processing plant in Japan with a capacity of 10,000 tonnes a year.

Livent owns 50% of Nemaska Lithium, which is building an integrated mine and lithium hydroxide facility in Quebec.

Allkem has received approval for its James Bay mine, stated to commence 2024, while Livent’s Whabouchi mine is expected to commence in 2025 and will feed the company’s nearby Becancour lithium hydroxide plant.

The combined company will maintain Livent’s primary listing on the New York Stock exchange and also have a “foreign exempt listing” in Australia.

Both Allkem and Livent will speak at Benchmark Mineral Intelligence’s Battery Gigafactories USAevent in Washington DC, on Thursday 8 June – Friday 9 June 2023.