Pilbara Minerals (ASX:PLS) released its December quarterly activities report on Wednesday, which garnered an enthusiastic market response amid a deepening selloff for lithium prices, with its share price rallying 5.8%.
The cause for the rally is undetermined and could be attributed to a myriad of factors from Pilbara’s strong operational performance, low market expectations or the stock’s high short interest.
In the face of a 46% quarter-on-quarter revenue drop, the Company advised investors not to expect an interim dividend, as it grapples with the ongoing challenges arising from the tumultuous impact of declining lithium prices on the sector.
Despite this, there are some positives to glean from the investor presentation, as highlighted by Pilbara Minerals Chief Executive Dale Henderson, who informed the AFR that within the industry, pricing and demand can shift rapidly.
“What motivates us and gives us comfort is that … as these inevitable ebbs and flows occur, Pilbara will stay positioned at the better end of the cost curve,” he said.
Figure 1: Slide 3 from Pilbara Minerals investor presentation
Pilbara demonstrated a robust operational performance in the quarter, achieving a production increase to 176.0 thousand tonnes of spodumene concentrate over the three-month period.
Furthermore, the Company reported elevated sales of spodumene concentrate, totalling 159.9 kt, with an average realided price of US$1,113 per dry metric ton on an SC5.2 basis.
Despite the lower revenue recorded this quarter, there were notable positive shifts, including a 9% increase in sales volume and a 14% reduction in unit operating costs.
With a robust ending cash balance of $2,144 million and a positive cash margin of $176 million, the Company maintains a secure financial position in the face of challenges within the lithium market marked by fluctuating prices.
Pilbara Minerals Projects
Pilbara’s wholly owned Pilgangoora Operation stands as a Tier One asset with significant growth prospects, strategically situated in the prolific Pilbara region of Western Australia.
Situated amid one of the world’s largest hard-rock lithium deposits, the Pilgangoora ore body holds strategic significance in the global lithium supply chain.
The Company’s operations are centered around two key processing plants: the Pilgan Plant, which produces spodumene and tantalite concentrates, and the Ngungaju Plant, dedicated to spodumene concentrate production.
With a mining and processing capacity of two million tonnes per annum, the Pilgan Plant consistently delivers between 360,000 to 380,000 tpa of spodumene concentrate.
Simultaneously, the Ngungaju Plant, boasting a nameplate production capacity ranging from 180,000 to 200,000 tpa, plays a pivotal role in augmenting the company’s robust spodumene concentrate output.
Lithium Pricing Outlook
Despite an increase in supplies of the battery metal, lithium prices are expected to continue their decline in 2024.
According to the forecast by Australia’s Department of Industry, Science, and Resources, the spot price of spodumene is projected to drop to $2,200 per tonne in 2025, down from an estimated average of $3,840 per tonne last year.
The Department indicated that prices are anticipated to remain below the peak levels observed in 2022 and early 2023, not recovering until potentially as late as 2025, attributed to the projected surplus in supply.
“Some higher-cost producers, such as lepidolite miners in China, have become unprofitable and cut production. However, most lithium producers will remain profitable at current prices and continue to produce,” it said.
Undeterred by the challenging climate, Pilbara persists in forging ahead, providing the market with high-quality spodumene concentrate and aspiring to be a low-cost lithium producer and fully integrated battery materials supplier.
PLS’s Australian Securities Exchange-listed share price is currently trading at $3.45 (11.45am UTC+ 8 hours).