Pilbara Minerals tumbles despite record profit as dividend disappoints
Lithium miner Pilbara Minerals has $3.3bn in cash after booking a $2.4bn annual profit and will decide by the end of the year how best to spend it.
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Pilbara Minerals boss Dale Henderson says the company will make a decision by the end of the year on the best use of the $3.3bn in cash on the company’s balance sheet, as the lithium miner weighs shareholder returns against growth and the sector’s volatility.
Pilbara Minerals shares closed down 41c at $4.70 on Friday – an 8 per cent tumble for the day – after the company said it would pay a final dividend of 14c a share, fully franked, after booking a $2.4bn net profit in an “amazing” full-year result.
Mr Henderson told The Weekend Australian the company’s board was still weighing up the most effective use of the cash, with special dividends or share buybacks an option to be considered against the company’s growth plans and other options.
Pilbara Minerals already has $490m-$540m in growth capital assigned to the expansions of its Pilgangoora operations, which could eventually take the company’s exports to more than a million tonnes of lithium concentrate a year.
Another $773m of the war chest will also be needed to cover the balance of the company’s corporate tax bill for the financial year.
Pilbara Minerals is also considering its options to move further downstream in its Australian lithium operations and produce a midstream lithium product, upgrading the lithium content of its exports without moving fully towards chemicals production.
The lithium major booked $4.1bn in revenue for the year, and EBITDA of $3.3bn on the back of producing 620,000 tonnes of lithium concentrate, finishing the year with $3.3bn in cash.
Pilbara Minerals said it realised an average $US4447 a tonne for its concentrate, which averaged about 5.3 per cent lithium. Mr Henderson said: “We had the most amazing year.
“We are positioned to be a mainstay of the industry for decades to come, and that’s pretty neat. And we’re a great Australian company that was not here that many years ago.”
Falling prices have dampened sentiment in the lithium sector recently and, while Mr Henderson said he expected pricing to be volatile over the next 12 months, he said demand from Pilbara Minerals customers remained strong, and ongoing work at the company’s operations was helping cut production costs. “The demand side remains solid in the sense that all our customers are absolutely fulfilling all their contracts and asking for more,” he said.
“The parameter which is more variable is the outright pricing, which is connected to the headline chemicals prices.
“What gives us comfort is being a larger-scale operation with a lower cost base relative to the other suppliers – and we will continue to make healthy margins, particularly as we scale up our production volumes.”
The company said it expected to produce 660,000-690,000 tonnes of concentrate in the current year, at a unit operating cost of $600-$700 a dry metric tonne – although it said it still faced inflationary pressure on labour and other input costs.
Morgan Stanley analyst Rahul Anand sounded a warning on the company’s costs, noting that underlying cash costs would probably be higher than Pilbara Minerals’ guidance.
Mr Anand said the costs did not include the cost of stripping off waste ore at Pilgangoora, worth about $160m in the current fiscal year – or about $200 a tonne.
Originally published as Pilbara Minerals tumbles despite record profit as dividend disappoints
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