Pilbara Minerals boss Dale Henderson says weak lithium prices will challenge some in the sector

Pilbara Minerals has announced a new $1bn debt facility and says further weakness in lithium prices will pose challenges for some operators in the sector.

Dale Henderson says Pilbara Minerals has been judicious in its strategy, allowing it to be ‘countercyclic’. Picture: Bloomberg

There is likely to be a further shake-out in the lithium sector, Pilbara Minerals managing director Dale Henderson says, with companies that fell victim to “lithium fever” likely to face even more pressure from weak prices.

Mr Henderson said on Monday that lithium prices had dropped another 22 per cent since the start of the current ­financial year, following a 67 per cent fall over the 2024 financial year.

UBS also came out on Monday saying it was forecasting a spodumene price of $US770 a tonne for the next 12-18 months, which contrasts with the average realised price Pilbara Minerals was paid for its spodumene concentrate – $US1176 a tonne – over the most recent financial year, which was down 74 per cent on the previous year.

UBS is expecting spodumene prices to be as much as 23 per cent lower by the middle of the 2026 calendar year. Mr Henderson said Pilbara Minerals had maintained its discipline in recent years while other companies had chased acquisitions, which left the company a healthy balance sheet, and able to move on deals such as its recently announced scrip offer for Latin Resources.

Pilbara, which reported an underlying net profit for the year to June 30 of $318m, down 86 per cent from last year’s $2.27bn, also announced a new $1bn debt facility that Mr Henderson said gave the company flexibility and balance sheet strength.

Mr Henderson said lithium was changing hands at a “very difficult price point’’ for some producers, which would “create a problem for the high cost ­operations’’.

Pilbara Minerals’ Pilgangoora lithium project in Port Hedland, Western Australia. Picture: Bloomberg

“It’s really the large-scale operators with an established footprint and established know-how who are best placed to navigate these periods of lower pricing, which is exactly what Pilbara Minerals is,’’ Mr Henderson said.

“Over the six years of operating experience we’ve been building out our base, we’ve been improving our operating know-how, and what flows out of that is some very strong, low-cost operating performance.

“We’ve avoided the lithium fever period of the past and been patient.

“So we think we’re in a really good position to navigate this part of the cycle and I wouldn’t be surprised if we see further curtailments globally from the higher cost operations.’’ Pilbara said on Monday that commissioning of its P680 crushing and ore sorting facility started in the June quarter, while the P1000 project, which includes expansions at the company’s Pilgangoora operation near Port Hedland, remained on track.

The company has previously said that the project, which will increase production and lower unit costs, is expected to be completed by the March quarter of 2025. Mr Henderson told The Australian it would “materially reduce the unit operating costs, so we’ll be a very low-cost operator on completion of that expansion’’.

Mr Henderson said Pilbara had been judicious in its strategy, and “chose not to rush out and buy assets when lithium prices were high”.

“We chose to focus on getting better at the operating platform. Invest back in the base, preserve the balance sheet,’’ he said.

“And having done that, it has afforded us the opportunity to be countercyclic … the likes of the Latin Resources transaction are exactly that – a well-timed, accretive transaction where Pilbara is in the driver’s seat around how we navigate that to market.’’

Lithium prices have dropped another 22 per cent since the start of the current ­financial year, following a 67 per cent fall over the 2024 financial year. Picture: Bloomberg

Pilbara Minerals’ statutory net profit came in at $257m, down from $2.39bn, on revenue of $1.25bn, down 69 per cent.

Barrenjoey analysts said the underlying result was a “small miss to consensus’’, driven by slightly higher costs.

Pilbara Minerals said it retained a “strong” cash margin of $513m for the 2024 fiscal year, and had a cash balance of $1.63bn at the end of the year.

The company did not declare a final dividend given its capital commitments such as the P680 and P1000 projects.

Meanwhile UBS downgraded share price expectations across four lithium producers on Monday, given its weak pricing outlook, with sell ratings on Pilbara Minerals and Mineral Resources.

The broker said it had lowered its outlook for electric vehicle sales, “with significant implications for lithium demand’’.

“With global automotive battery demand now up to 10 per cent lower through to 2030 (partly as a result of about 10 per cent higher plug-in hybrid EV share across the same period, and partly reflecting lower outright EV demand) this has a similar impact for lithium demand,’’ UBS said.

“While we note some supply is being deferred, it is not enough, and as a result we mark-to-market spot prices and downgrade 2025 and 2026 calendar year chemical and spodumene prices by up to 23 per cent. On equities, this leads to significant near-term earnings per share downgrades.’’

UBS said while it had not observed any large-scale lithium project curtailments yet, “it is clear that the stress of low prices needs to drive production curtailment and delay/deferral of growth projects’’.

Pilbara Minerals shares closed up 4c at $3.02.

Originally published as Pilbara Minerals boss Dale Henderson says weak lithium prices will challenge some in the sector