Pilbara makes case for expansion

PILBARA Minerals is planning to start the expansion of its Pilgangoora lithium project within months after the stage two prefeasibility study made a compelling case for the more than doubling of annual output.
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An aerial photo of the current construction (in orange) with a stage two 3D model overlay (in blue).

Kristie Batten

The A$274 million stage one, 2 million tonne per annum project is currently nearing commissioning, but the PFS proposes expanding throughput to 5Mtpa.

That would see annual production from the project rise to 800,000 tonnes per annum of 6% spodumene (or 100,000tpa of lithium carbonate equivalent) and around 780,000 pounds per annum of tantalite.

Cash operating costs would be US$210 per tonne cost, insurance and freight, and $225/t over the life of the mine.

Capital costs would be A$207 million.

The PFS returned a post-tax net present value of $2.1 billion, an internal rate of return of 56% and payback of just three years.

Forecast revenue over the 17-year life of mine is $11.5 billion, with life-of-mine earnings before interest, tax, depreciation and amortisation of $6.5 billion.

The figures are based on a LOM spodumene concentrate price of US$594/t CIF.

Existing lithium producers Galaxy Resources and Mineral Resources have recently reported much higher prices.

Galaxy recorded a selling price of $868/t for the December quarter, while MinRes last week flagged a current half sales price of $900/t.

Pilbara is aiming to complete a definitive feasibility study into the expansion by mid-year, followed by a final investment decision in the September quarter.

Construction could begin in the December quarter for commissioning a year later.

Pilbara already has the support of Ganfeng Lithium and Great Wall Motor Company.

Of the additional tonnage to come from stage two, 150,000tpa is committed under existing offtake agreements, while an additional 150,000tpa subject to Great Wall and Ganfeng providing cash prepayment or debt finance facilities totalling around $100 million.

Pilbara said the balance of the stage two production was subject to current offtake discussions, while the remaining funding required could be secured via stage one cashflow, offtake, debt, prepayments or equity.

Pilbara managing director Ken Brinsden described the PFS results as compelling, with the decision to study an expansion into the 5Mtpa rate vindicated.

“The exponential growth which is occurring across the lithium-ion supply chain as the industry in China and elsewhere gears up for transformational growth to meet demand from the automotive and energy storage sectors is now becoming better understood,” he said.

Brinsden said current drilling was likely to further increase resources and reserves, increasing the potential for an extension of the mine life or the optimisation of production scenarios.

“Together with confirmatory test work and DFS technical refinement to be undertaken over the next few months, we are confident this will provide further upside over and above these impressive results,” he said.

“However, the PFS results alone clearly justify a decision to complete the current stage two DFS, which is well underway and on track for completion in the September quarter of this year.”

Meanwhile, stage one will start commissioning in the June quarter, while direct shipping ore sales will also begin around the same time via an agreement with Atlas Iron.

Shares in Pilbara jumped by 9% to A86.7c. The stock traded as high as $1.22 in January before dropping to 79.5c yesterday.