Pilbara Minerals flags massive lithium expansion despite supply glut
Pilbara Minerals boss Dale Henderson says he is not concerned a plan to triple the company’s lithium output will create a glut in the market and undermine pricing.
Pilbara Minerals boss Dale Henderson says he is not concerned a plan to triple the company’s lithium output will help glut the market and undermine pricing, as the company weighs a plan that could make it Australia’s biggest lithium exporter.
Mr Henderson released the results of the company’s pre-feasibility study into pushing production out to 2 million tonnes of lithium concentrate a year, saying a $1.2bn outlay could push down Pilbara Minerals’ production costs and help increase its market share.
Tumbling prices having taken the wind out of the Australian lithium sector, forcing the delay of new entrants such as Core Lithium. But Pilbara Minerals is sitting on a $1.8bn cash war chest as a result of its last production expansion – also launched at a time of depressed pricing – which helped the company cash in as prices soared in 2022.
The price of lithium concentrate has slumped as much as 80 per cent over the last 18 months, and was recently sitting around $US1000 a tonne according to some price estimates.
But despite downbeat market sentiment on the commodity, Mr Henderson said Pilbara Minerals is confident its ongoing expansion plans will not “move the needle” on the supply and demand balance, given the long-term projections on the need for more lithium supply.
Pilbara Minerals is set to export 660,000 and 690,000 tonnes of lithium concentrate this financial year, and is already expanding its operations to grow production to 1 million tonne a year mark within a few years.
The latest suggests the company could be exporting 2 million tonnes a year from 2029 if a third concentrator is built at its Pilgangoora mine, along with a major expansion of other parts of the processing plant.
The study’s projections are based on an assumption that prices for concentrate grading 6 per cent lithium will average at about $US1500 a tonne for the long term, or about $US1300 a tonne for the 5.2 per cent grade the company plans to export.
That is well above current levels, which have tumbled in the face of a supply glut, but Mr Henderson said he believed growth of electric vehicle production will support stronger demand and pricing over the next decade, and Pilbara Minerals will lift output to meet that demand.
Pricing of $US1000 a tonne was emerging as the market floor for global production, he said.
“What we’ve been observing and hearing from others is that looks like $US1000 per tonne is a level which is very much a swing price and is a level where quite a lot of the existing operators can no longer participate” he said.
“In which case the long run price, to enable some kind of margin and incentivisation to enter the industry, has to be above that.”
Mr Henderson said that, despite muted sentiment, the company was still taking calls from customers looking for more.
“Not like it was back in 2022. But we are still receiving requests from some very major players further downstream who want to establish long term relationships.”
Pilbara Minerals shares closed down 9c to $3.11 on Friday.
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