Pilbara Minerals Ltd (ASX: PLS) Share Price and News

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Introduction to Pilbara Minerals (ASX:PLS)

Pilbara Minerals owns and operates thе Pilgangoora spodumene minе in Wеstеrn Australia. Thе Pilgangoora dеposit is not only vast, with a recently updated resource sizе of 413.8Mt grading 1.15% Li2O, but also has an abovе-avеragе gradе which is a critical factor in the efficient extraction of lithium.

It lies 120km from Port Hedland and is one of the largest deposits of lithium spodumene and tantalum in the world. Spodumene is the mineral that yields lithium while tantalum is valuable for its use in electronics and alloy metals given its corrosion-resistant properties.

Pilgangoora is a hard rock project, which is costlier to mine than underground brine deposits. But beggars for lithium cannot be choosers. Only hard rock lithium can convert directly to lithium hydroxide – the chemical that might be needed over lithium carbonate to improve energy density in batteries in the years ahead.

Pilbara Minerals' Company History

Pilgangoora began commercial production back in April 2019. The first 12 months were tough because of the oversupply in the lithium market and, in early 2020, the Corona Crash. But the share price recovered in conjunction with the lithium price and increased demand for electric vehicles. Governments have made their carbon emission targets clearer, ushering in a new era of electric powered transportation. And the rise of Tesla has led to almost all other car manufacturers scrambling to catch up.

Pilbara Minerals timed its run perfectly, signing a five-year offtake agreement with Chinese lithium producer Yibin Tianyi back on 25 March 2020. And in October of that year, it bought the Altura Lithium Operations for US$175m, expanding the Pilgangoora operation and leveraging the lithium price recovery. Beyond its lithium resource, the company is building a 6MW solar farm at Pilgangoora and has a joint venture agreement with POSCO to develop a lithium hydroxide conversion facility in South Korea.

In FY23, Pilbara Minerals made $4.1bn in revenue, up from $1.2bn just 12 months prior, off the back of 607.5kt in lithium shipped, up 68% from the year before – at an average lithium price of 87% higher than the year before.

The company’s post-tax profit came in at $2.4bn, up from $0.6bn just a year earlier and it paid a dividend of 25c per share. It closed the period with a $3.3bn cash balance.

Future Outlook of Pilbara Minerals

Pilbara Minerals is well positioned as a major lithium player, with such a high-quality asset and supply relationships with Gangfeng and Chengxin. However, the company is battling lower lithium prices and consequential dented investor sentiment.

In the September quarter of CY23, the average realised sales price was US$2,240 per tonne, down 47% from 12 months ago. Just 3 months after that, prices dropped to $1,113/t. Unit operating costs have jumped 16% from 1HY23 to 1HY24.