Image source: Ksenia Ragozina, Shutterstock

Highlights

  • Pilbara is an ASX-listed tantalum and lithium explorer and producer
  • Policy support in multiple jurisdictions supports demand for EVs, which bodes well for lithium demand
  • The Australian Government allocated AUD 200 million to the Critical Minerals Accelerator initiatives

Pilbara Minerals Limited (ASX: PLS) is an Australian pure-play lithium firm which is engaged in the development, exploration and mining of minerals in Australia.

During the first quarter of the financial year 2024 (1QFY24), production declined by 2% PcP to 144.2k tonnes, while  sales increased by 6% PcP and reached 146.4 million tonnes. The company ended the latest quarter with a cash balance of AUD 3 billion, compared to AUD 1.4 billion in 1QFY23.

The company reported an 11% annual decrease in the unit operating cost to AUD 1,004/tonne, reflecting favourable cost-saving parameters.

Growth prospects

Demand for electric vehicles (EVs) remained strong, supported by significant policy support in various jurisdictions, which continued to be a crucial driver for lithium utilization. Australia took the lead in global lithium extraction, and mine production is expected to grow continuously. Anticipations suggest a surge to 3.3 million tonnes in FY24 and 4.0 million tonnes in FY25.

Projections indicate sustained high growth in global lithium consumption, driven by increased battery demand for the energy transition. Australia achieved a record lithium exports, reaching AUD 20 billion in 2022-23. The country's lithium mining sector saw growth through expansions and the establishment of new mines.

During the June 2023 quarter, production in the mining industry increased by 2.9% compared to the previous corresponding period (PcP), due to a rise in coal mining production.

To support strategically important projects, the Australian Government allocated AUD 200 million to the Critical Minerals Accelerator initiatives.

Challenges in the sector

In September 2023, the business turnover index decreased substantially in the mining industry by 15.4% PcP. Input costs of mining activities surged because of increased cost of freight, raw materials, utilities and labour.

Outlook

The company shared that ore reserve grew by 35% to 214Mt in the latest quarter and a study has been initiated to assess further expansion of production capacity beyond 1Mtpa. Results of the study are expected in 4QFY24.

In 2QFY24, the company expects to see consistent demand for lithium raw materials. Moreover, the company said that the long-term outlook for the lithium materials supply seems positive because of the supply demand gap.

Share performance of PLS

PLS shares closed 0.55% up at AUD 3.64 apiece on 24 November 2023. Including this gain, PLS’s share price has decreased by 23.85% in the last 12 months and has recorded a fall of 22.55% in the last three months.

The 52-week high of PLS is AUD 5.34, recorded on 4 July 2023, while the 52-week low is AUD 3.35, recorded on 23 March 2023.

Note 1: Past performance is neither an Indicator nor a guarantee of future performance.

Note 2: The reference date for all price data, and currency, is 24 November 2023. The reference data in this report has been partly sourced from REFINITIV.