Pilbara Minerals Ltd (ASX: PLS)

Key milestone to enhance the top-line from fast growing South Korean Lithium raw material market: Pilbara’s stock surged 10.84% on February 28, 2018 after the securities came out of the trading halt with the company announcing about an offtake agreement signed with South Korean Conglomerate POSCO. According to this deal, South Korean steelmaker POSCO will acquire 4.75% stake in Australian Miner Pilbara Minerals. Additionally, POSCO has agreed to buy up to 240,000 tpa of lithium concentrate from PLS with an initial 80,000 tpa from the 5mtpa stage 2 Pilgangoora Project. The initial amount will be enhanced with PLS’ participation in joint venture conversion plant. This will boost the top-line growth for the company in years to come. PLS thus planned to take 30% participation in POSCO’s planned future lithium factory.

PLS is an emerging lithium and tantalum producer, majorly focused on the development of its world-class 100% owned Pilgangoora Lithium-Tantalum Project located at Pilbara region of Western Australia. The company now plans to begin production of about 300,000 tonnes of lithium concentrate in the second half of the year, eventually reaching as much as 800,000 tpa on an annual basis. As per industry research, Lithium prices have more than doubled in past two years because of rise in solid demand from battery sector, and this has benefitted PLS. Recently, the company showed solid revenue growth in first half of FY18 and the group’s consolidated net loss after tax improved to $9,973,000 from $19,199,000 in 1HFY17 on the back of reduced selling, general and administrative cost, exploration cost and share based payment expenses as compared to previous corresponding year. Management guidance on capex is around $284 Mn to support the stage 2 development project and minor capital for DSO operation in years to come. Meanwhile, agreement with POSCO and higher realisation of lithium is expected to boost the overall growth of the company.

PLS stock has fallen 19.4% in one month owing to lithium sector headwinds and was down over 2% on February 27, 2018. Thus, the recent sell-off seen in the previous trading session was reversed with the latest update. With medium-term potential and the above development, we reiterate a “Hold” recommendation on the stock at the current price of $0.92


Pilbara among peers in terms of Development (Source: Company Reports)

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