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Great post triage, I started buying in first half 2016 through...

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Swift4

520 Posts.

263

04/06/23

08:20

Post #: 68118600
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Originally posted by triage: ↑

A couple of weeks ago after having the teensiest of rants about the lack of tangible progress and transparency from Allkem I was snidely rebuked by some know-it-all greenhorn as thinking like a "new investor". FO! I thought but decided not to rise to the slight at the time. But I've decided to flesh out my whinge using Olaroz 2 to prove my point.

Olaroz 2's chronology:

22 November 2018: The Final Investment Decision approved with commissioning scheduled to be undertaken in H2CY20 (2nd half of 2020) - so 2 years.

22 February 2019: Construction begun, commissioning in H2CY20.

23 August 2019: commissioning delayed to H1CY21.

21 February 2020: 25% complete but commissioning delayed to mid-2021.

13 November 2020: 44% complete but commissioning and production start delayed to H2CY22.

30 November 2021: just commissioning by H2CY22.

5 April 2022: improvement in timing with first production by H2CY22.

25 August 2022: first production window now set at December 2022.

15 November 2022: commissioning now delayed to Q1CY23 and first production now delayed to Q2CY23. At the time shareholders were assured that the new timing was a worst case scenario and that the Company expected to be able to land these milestones earlier.

18 January 2023: same, same.

24 February 2023: first production confirmed for the June quarter (Q2CY23).

3 May 2023: commissioning and first production expected in the June quarter (has commissioning even begun yet?)

5 June 2023: So we are now more than 70% of the way through the June quarter and we still do not know if Allkem has even started the commissioning process let alone will have first production in the next three weeks. Also remember that from first production to nameplate even in the best case scenario is at least 18 months. First production is an important but interim milestone.

It is crucial to remember that Allkem is one of the rare lithium birds that have already designed, constructed and operated a brine facility and Allkem made the deliberate decision to model the Olaroz 2 facility on the Olaroz 1 facility while rectifying the mistakes they made in Olaroz 1. From that experience and expertise they've accumulated they were able to judge that they would take about 2 years to get the new facility commissioned and operating. That 2 year FID timeframe has now blown out to four and half years and counting. In their most recent comment on the project, in early May, they did not even confirm that commissioning of the plant had commenced so we still do not know when the commissioning will get underway. There is no certainty it will be this month.

So in terms of progress they have taken more than twice as long as they themselves expected to build something they have already built before. And in terms of transparency it is obviously unacceptable that they are not being more forthcoming about events that should be imminent. Perhaps those low levels of performance from Allkem are deemed acceptable to a wet-behind-the-ears Dunning-Kruger case study but for anyone who values the concept of time being money they will appreciate that these ongoing delays and non-disclosure at this time in particular leave Allkem vulnerable to exploitation by Goldman Sachs types.

It would be great timing were the company to make a material and positive announcement about this project before Martin MD goes to the chinwag next week in Washington DC. It would at least balance the "eloquent" bragging (hat tip Howard from RK Equity - razor-sharp analysis there, Howard) that we can expect from Pall the Squidman Graves about Livent's just announced deal with GM. It would also be timely given Toyota's recent announcements about their intentions in the US (remembering that an associate of Toyota, Toyota Tsusho, owns more than 30% of the Olaroz project with Allkem and is joint marketing agent for Olaroz product).

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Great post triage, I started buying in first half 2016 through Galaxy. Sold of a few second half 2022 to improve my young families lifestyle and help me sleep better at night. I still hold a few directly and a good chunk through superannuation.
Painful to watch PLS fly past our market cap and painful to see investors becoming very wealthy by investing in juniors with management who have a bit more of a pulse.

I think your %100 right that it wouldn't hurt them to give us an update on Olaroz. Wouldn't hurt them to give us an update on Nahara too. They have admitted their PR is poor, promise to improve but never do. I don't need constant updates but one now would be good.
With the Yanks getting in on this I'm sure they will be shouting every milestone from the top of buildings. So we can look forward to that.

AKE Price at posting: $14.77 Sentiment: Buy Disclosure: Held
32 Upvote

8 Great analysis

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