Pilbara Minerals Limited (ASX: PLS)

PLS is involved in lithium-tantalite mining, exploration, and development. Its major projects include: Pilgangoora Lithium-Tantalite Project and Altura Lithium Operations (aka Ngungaju Lithium Operations). Incorporated in 2005, its market capitalization stood at AUD 7.76 billion as of 26^th November 2021.

Financial and Operational Updates: As per the release on 23^rd November 2021 update, it expanded its existing finance facility from USD 20 million to USD 130 million and undrawn Working Capital Facility to USD 25 million. As stated in September Quarterly Results on 28^th October 2021, the company posted record production of ~85.75k dmt spodumene concentrate in Q1FY22 as compared to ~77.16k dmt in June 2021 quarter. For FY22, its spodumene concentrate production is forecasted to be ~460k-510k dmt with shipments expected to be in the range of ~440k-490k dmt. It is expecting costs to rise in FY22 and FY23 owing to elevated strip ratios as Pilgan Production ramped-up. It recorded sales receipts at ~AUD 100.90 million in 1QFY22 with a cash balance of ~AUD 137.30 million  

Technical Analysis: PLS stock price witnessed a robust rally from the low of AUD 1.78 to a 52-week high of AUD 2.67 tested on November 26, 2021. The prices are trading below an upward sloping trend line resistance level at AUD 2.69 and continuously facing the resistance of the same on the daily chart. The leading indicator RSI (14-period) is trading near an overbought zone at (~68.99 level) and formed negative divergence, which might indicate the possibility of a downside correction from the higher levels.

Considering ~138.46% returns generated in the last nine months and a possibility of low profit margins due to its expected increase in costs in coming years FY22-23, we suggest investors to “Sell” this stock and book profit at the current market price of AUD 2.63 per share as of 26^th November 2021, 12:33 PM (GMT+10), Sydney, Eastern Australia.

Daily Technical Chart – PLS

Source: REFINITIV

Note, the purple color line at the bottom of the chart depicts RSI (14-day period).

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite for upside potential, risks, holding duration, and any previous holdings.

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