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Saturday, Dec 2, 2023
Mugglehead Magazine
Alternative investment news based in Vancouver, B.C.


Livent starts conversations with Allkem ahead of the US$10.6B lithium giant merger

The world’s largest lithium producers are optimistic about long-term demand despite recent price drops

Livent Corporation set to start courting Allkem investors ahead of USD$10.6B merger
Allkem's property at Sal da Vida, Argentina. Image via Allkem.

Livent Corporation (NYSE: LTHM) will meet with Allkem Limited (ASX: AKE) investors this week to approve a USD$10.6 billion merger that would combine the two companies into the world’s third-largest lithium producer.

The new company will be called Arcadium Lithium.  Livent said on Monday that Arcadium will give one share to Allkem shareholders for each of their shares, and ultimately own 56 per cent of the company. Livent shareholders will receive 2.406 shares in the new company for each existing share.

If next month’s shareholder vote is for the merger, Livent’s CEO Paul Graves will assume the position for the combined company, which will be called Arcadium Lithium. Graves said on Monday that one of his initial priorities would involve expanding Arcadium’s presence in Western Australia’s world-class lithium districts.

The newly merged company would be the third largest under Ablemarle Corporation (NYSE: ALB) and Chile’s Sociedad Química y Minera de Chile (SQM) (NYSE: SQM) with assets spanning Australia, Canada and Argentina.

Despite recent price drops driven by fears of slowing electric vehicle adoption, the world’s largest lithium producers, including Livent and Allkem, have expressed optimism about long-term demand.

The companies have projected that the deal will generate pre-tax operating cost synergies of approximately USD$125 million per annum by 2027.

Read more: Lithium South Development first production well installed at Hombre Muerto lithium project

Read more: Lithium South Development expands production goals, updates PEA on Hombre Muerto lithium project

Argentina is a strongly contested space for lithium

Livent’s Q3 revenue dipped 10 per cent compared to Q2 to USD$211.4 million, siting expansion start-up delays at its Argentina properties, but that doesn’t take anything away from the region’s earning potential.

The company’s present operations in Argentina are expected to play a significant role in the new company’s future success.

The merger between both companies promises to generate substantial value for its shareholders through a strategic approach.

By combining assets and optimizing operational processes, it expects to achieve significant annual operating cost savings of approximately USD$125 million before taxes. These savings will primarily come from eliminating redundant expenses, improving procurement practices and streamlining operations at key locations like Sal de Vida, Hombre Muerto, and the Whabouchi project in Québec.

The company anticipates that most of these cost efficiencies should materialize within a three-year timeframe.

The merger will facilitate the exchange of technological expertise, enabling more efficient management of product flows, improved plant efficiency and enhanced marketing efforts.

The business combination will also merge the direct physical holdings in the Hombre Muerto project in Argentina, placing more competition pressure on the company’s already present in the space.

A few other companies operating in lithium-rich Argentina include Posco Holdings (KRX: 005490), Stellantis (NYSE: STLA) and Lithium South Development Corporation (TSXV: LIS) (OTCQB: LISMF) (Frankfurt: OGPQ), which recently expanded its lithium brine resource at its Hombre Muerto North project by 175 per cent and started drilling new wells at the site.


Lithium South Development Corporation is a sponsor of Mugglehead news coverage


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