Pilbara Minerals to push on with lithium expansion spend, banking on cost reduction to weather lithium price crash
The miner, led by Dale Henderson, is banking on ramping up volumes and cutting unit production costs to stay competitive amid tumbling lithium prices.
Pilbara Minerals boss Dale Hendersen says the lithium sector could experience more wild price swings until supply and demand levels stabilise into a more predictable price cycle, as the lithium major pushes ahead with major expansion plans to keep close to the bottom of the lithium cost curve.
The lithium producer said on Wednesday it will push ahead with plans to expand its Pilgangoora lithium project to a million tonnes per year export rate, despite crumbling lithium prices almost halving the company’s revenue in the December quarter.
Pilbara Minerals released its December quarter production report on Wednesday, saying it had booked $265m in revenue in the quarter, down from $493m in the September period, with slightly higher export volumes partially offsetting a halving of the price the company received for its lithium concentrate.
Pilbara Minerals exported almost 160,000 tonnes of lithium concentrate in the quarter and said it was paid an average $US1,113 a dry metric tonne for concentrate grading an average 5.2 per cent lithium. That is the equivalent to $US1280 a tonne for concentrate grading 6 per cent lithium.
The company was badly hit by delays getting its concentrate out from Port Hedland, however, noting that the bulk of its exports took place in December – as the lithium price rout was in full swing.
And that average price figure may still fall further, with the company noting it was currently seeing pricing of $US800 to $US900 in the market, and about 73,000 tonnes of its December exports are still subject to provisional pricing.
Mr Henderson told The Australian the company’s marketing team was still seeing some offers on the spot market as high as $US1000 a tonne, saying the company was still seeing plenty of inbound inquiries about the availability of concentrate despite gloomy market talk of an oversupply.
The company said it was shipping concentrate to its customers at an average cost of $US805 a tonne.
Pilbara Minerals warned on Wednesday the company was unlikely to pay an interim dividend when delivering its half-year financial results in February, preferring to hold onto cash to ride out the lithium price crash.
Despite dire market conditions that have forced both Core Lithium and Liontown Resources to scale back development plans for their own lithium operations, Pilbara Minerals said it would push on with its project to lift production at Pilgangoora to 1 million tonnes a year, which builds on a current expansion targeting around 680,000 tonnes a year.
Pilbara Minerals said it still expects first ore from its P1000 project by March 2025.
But the company said it will be cutting aspects of its capital spending program in response to tumbling lithium prices, saying it now plans to spend $820m to $875m on capital projects – a cut of up to $100m with “a number of non-essential new projects and enhancements deferred”.
Mr Henderson told analysts the company was looking to bake in the benefits of its expansion plans, saying the company’s unit production costs were falling as it ramped up output.
“We’ve seen this before, we have a playbook,” he said.
“The difference now is we’re materially stronger in every respect – our scale and our relationships, and our balance sheet position. You could not ask for a better position to navigate these waters.”
Mr Henderson told The Australian he believed the global market was still too young to have settled into a regular price cycle, despite the broad confidence demand for lithium will grow strongly over the next decade.
“But that rate of growth is incredibly difficult to predict, I think we’re seeing the evidence of that in the rearview mirror,” he said.
“Nobody really saw the uptake we had coming, both in timing and in how high it went in terms of the last cycle of high pricing. And I suspect that may repeat.”
Mr Henderson said the company had no plans to idle production or stockpile production amid the market downturn, as it did when lithium prices tumbled in 2019 and 2020.
“We’ll continue to monitor providing market pricing, and we will obviously make the decisions which reduce risk for shareholders and maximise their returns – one of which is we could moderate production if that made the most sense to the business,” he said.
“But there’s no sign of needing to do that at the current pricing levels, at this stage.”
Pilbara Minerals finished December with $2.1bn in cash – down $897m from the previous quarter, after the company paid a $768m corporate tax bill. Pilbara Minerals said its operations generated a $176m cash margin in the period.
Shares in the company closed up 5.8 per cent at $3.46 on Wednesday.
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