Pure-play lithium producer Pilbara Minerals flags $68m-$71m net loss

The miner is counting the cost of investments in lithium processing as prices for the battery-making ingredient flatline.

Pilbara Minerals chief executive Dale Henderson. Picture: Bloomberg

Pure-play lithium producer Pilbara Minerals is weighing up its downstream investment timetable against the prospect of more losses as prices for the battery-making ingredient continue to flatline.

Pilbara Minerals flagged a net loss of $68m-$71m for the first half as weak commodity prices weigh on a lithium processing joint venture with South Korean heavyweight POSCO and a smaller venture with ASX-listed Calix.

The update came less than a week after Pilbara Minerals completed the all-scrip acquisition of a lithium project in Brazil from Latin Resources in a bold countercyclical move that mirrors Rio Tinto’s long-term faith in the battery mineral.

Perth-headquartered Pilbara Minerals warned the bleeding from the Korean processing plant could continue into the second half of 2024-25 depending on ramp up progress, sales performance and market prices.

The company may also need to pump additional cash into the plant during 2025.

Pilbara Minerals and Calix will consider resuming work on a stalled pilot plant in WA after receiving more taxpayer support in the form of a $15m grant from the state government in January.

The partners paused work on the pilot plant last October, saying any restart would depend on higher lithium prices or additional government support.

Other big players in WA lithium, including Mineral Resources, New York-listed Albemarle and China’s Tianqi, have walked away from or scaled back downstream processing projects amid job losses and mine closures in the sector.

Pilbara Mineral boss Dale Henderson said the company was positive about the long-term potential of both the POSCO and Calix projects. He said any scale up would be at the discretion of Pilbara Minerals.

“These projects continue to reflect the effects of current lower market pricing, development costs or ramp up costs as shown in the expected results,” he said.

The first-half net loss of $68m-$71m flagged by Pilbara Minerals compares to a $220m profit for the same period last year. Group earnings before interest, tax, depreciation and amortisation will range from $45m-$49m, compared to $415m in the previous corresponding period.

Pilbara Minerals, one of the most heavily shorted stocks on the ASX, foreshadowed underlying EBITDA of $71m-$75m and a net loss of $5m-$7m on its flagship Pilgangoora lithium mine in WA’s Pilbara region amid a big investment in boosting production.

The company, which took on a $1bn loan to grow Pilgangoora last August, said the latest expansion of the mine was completed in January.

The overall result includes a non-cash writedown of $16m on the carrying value of its call option to increase its stake in the POSCO joint venture from 18 per cent to 30 per cent.

Pilbara Minerals said it expected to book a net loss of about $22m for South Korean plant, which reflected low prices for lithium hydroxide it produces.

Grim price forecasts were behind the cut in the carrying value of the call option increasing its ownership stake as POSCO pushes ahead with commissioning a second production train at the hydroxide plant.

Pilbara Minerals pumped about $24m in construction costs into the WA pilot plant aimed at producing a midstream lithium chemical.

It is in talks with Calix about resuming construction on the back of the $15m grant from the WA government.

If work resumes, the pilot plant could be completed by late in 2025 with any costs to Pilbara Minerals fully offset by the government grant.

Pilbara Minerals soared to a maiden full-year profit of $561.8m in 2022-23 after narrowly surviving the first big collapse in the lithium market.

Mr Henderson said on Monday that the company remained excited about the long-term outlook for the lithium market despite the prolonged slump in prices and noted Pilbara Minerals had $1.2bn of cash on its balance sheet at December 31.

Pilbara Minerals shares closed down 1.35 per cent at $2.20 each.

Originally published as Pure-play lithium producer Pilbara Minerals flags $68m-$71m net loss