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Pilbara perfectly placed for surging lithium demand

Company now one of the world's major spodumene producers

Pilbara minerals
Pilbara perfectly placed for surging lithium demand

Lithium producer Pilbara Minerals has survived some dark days and is now in a strong position to capitalise on "remarkable" market conditions.

Pilbara last month declared an inaugural interim profit of A$114 million after posting a loss of $21.2 million in the previous corresponding period - when lithium prices were just a fraction of what they are now.

The average sales price for the half jumped to US$1250 per dry metric tonne. Prices had been as low as $400/t in the December 2020 half.

So far in 2022, the price has continued to surge, with "incredible" prices of up to $4500/t reported.

Pilbara had previously guided for prices of $2600-3000/t in the current half.

Pilbara managing director Ken Brinsden said the market was extremely tight and spot sales via the company's BMX platform had the potential to be even higher still.

Canaccord Genuity analyst Timothy Hoff said Brinsden had consistently been correctly calling the price and now was no reason to doubt him.

"We move our 2H average pricing from $3300/t to $3650/t, implying a $4500/t realised price in the June quarter, 2022," he said.

"On current spot chemical prices, if a BMX auction were run today we would not be surprised to see pricing move past $6000/t based on our estimate of circa 20% converter margins."

Production from Pilbara's Pilgangoora operation for the December half was 168,235 tonnes of spodumene.

Full-year guidance for is 340,000-380,000t, including 75,000-90,000t in the current quarter, which is for the Pilgan plant only.

Pilgan has capacity of 330,000t per annum, but Pilbara has recently completed a plant improvement project to increase production by 10-15%, or 30,000-50,000tpa.

Costs for this financial year are forecast at A$450-490 per dry metric tonne free-on-board Port Hedland, excluding royalties, or US$325-355/t.

Pilbara is in the progress of restarting the neighbouring Ngungaju plant, which was picked up via the company's countercyclical acquisition of Altura Mining in late 2020.

Commissioning of the fines circuit is due to get underway shortly.

Once Ngungaju is ramped up, Pilbara is targeting combined production capacity of 560,000-580,000tpa from the September 2022 quarter.

Unit costs are expected to rise to A$530-570/t in FY23, mainly due to higher strip ratios, but will moderate in the longer term.

Given strong market demand conditions, Pilbara is eyeing further expansion opportunities.

The P680 project is looking at a 100,000tpa brownfields expansion, while the potential P1000 project would take nameplate capacity to 780,000-800,000tpa.

Pilbara is targeting total production of 1 million tonnes per annum of spodumene in the coming years with the potential for production of "mid-stream" value-added products, including lithium salts.

The company will also go downstream via a partnership with POSCO. The joint venture will develop a 43,000tpa lithium hydroxide monohydrate plant in South Korea.

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