Lithium producer Livent Corp's processing plant is seen in Belmont, N.C., on July 15, 2021. The merger between Livent Corp. and Allkem Ltd. creates the world’s third-largest miner of a key raw material in electric vehicle batteries.ERNEST SCHEYDER/Reuters
Two of the world’s largest lithium producers announced a US$10.6-billion merger on Wednesday that is expected to speed development of mines and a refinery in Quebec.
Brisbane, Australia’s Allkem Ltd. is joining forces with Philadelphia-based Livent Corp., LTHM-N uniting the owners of lithium mines in Canada, Argentina and Australia, and a global network of processing plants. The merger creates the world’s third-largest miner of a key raw material in electric vehicle batteries.
Allkem owns the James Bay mine project in Quebec, which is expected to cost US$286-million to develop and should begin production by 2026. Livent owns 50 per cent of the Nemaska mine property, located approximately 100 kilometres away, and is expected to start producing lithium in 2024. Investissement Québec, a government agency, owns the other half of the project.
Livent also owns 50 per cent of a planned lithium processing facility in Bécancour, Que., on the shores of the St. Lawrence River.
“The combination of James Bay and Nemaska will create a truly world-class suite of lithium assets, firmly based in Quebec,” said Arne Frandsen, managing partner at London-based private equity fund Pallinghurst Group, which focuses on investments in battery materials. Last May, Pallinghurst sold its 25-per-cent stake in Nemaska to Livent, in exchange for shares in the company.
“You have the potential of increasing the volumes produced over the years to come,” Mr. Frandsen said. “Such production levels also enable expansion at the size of the hydroxide plant in Bécancour.”
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The merger creates a company with US$1.4-billion of liquidity and mines in Quebec with an estimated 40 years of lithium reserves. The city of Bécancour, population 15,000, is already home to a battery factory jointly owned by General Motors Co. and South Korea’s Posco Chemical Co. Ltd., and is the site of potential battery projects from Ford Motor Co. and Brazil’s Vale SA.
The merger of Allkem and Livent “could open the door to a dual lithium conversion facility on the doorstep of the world’s biggest auto market,” said analyst Reg Spencer of Canaccord Genuity Group Inc., who visited Allkem’s operations this week.
Allkem director John Turner, a Toronto-based partner in law firm Fasken, said the mining company has an excellent relationship with the Cree Nation Government and Cree Nation of Eastmain, the community closest to the James Bay project, and built support for the mine.
In addition to their Quebec operations, the two companies own four lithium projects in Argentina and eight processing facilities, including three plants in China and one in Japan. In a report, Australia-based analysts at RBC Capital Markets said the merger will result in significant savings for both companies, as Livent’s “leading lithium processing technology” is used to refine material from Allkem’s projects, particularly its properties in Argentina.
Allkem and Livent expect to initially save US$200-million by combining their global engineering and construction teams, then cut annual costs by US$125-million through streamlining operations.
Over the past two years, the lithium industry has seen its largest companies expand through friendly mergers and hostile takeovers. On Wednesday, RBC’s analysts said another mining company could try to top Livent by making a hostile bid for Allkem. The RBC team said: “Today’s merger will likely further increase the focus on sector consolidation.”
Benchmark lithium prices rallied sixfold over the two years to November, but have since plunged. Analysts say that created an opportunity for major EV battery makers to acquire projects and secure the raw material needed to meet surging demand from automakers switching to EVs.
Livent supplies lithium products to multiple U.S. automakers, including GM, Tesla Inc. and BMW. “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, Livent’s chief executive, said in a news release. “We look forward to playing an even bigger role in the acceleration of decarbonization policies.”
Livent’s Mr. Graves will take the top job at the new entity, while Allkem CEO Peter Coleman will be chair of the combined companies.
The merger will see Allkem shareholders own 56 per cent of the new company, while Livent shareholders will hold 44 per cent. Each company will nominate seven directors to the 14-member board. Allkem shares are listed on the Toronto Stock Exchange and rose 10 per cent on Wednesday after the deal was announced.
With reports from Reuters