At time of writing, Pilbara Minerals Ltd [ASX:PLS] is up 8.93%, trading at 30.5 cents per share.
The Pilbara Minerals share price has been in a slide all year:
The company was given a boost today by lithium supply concerns out of Chile. It’s a similar thing to what happened with the nickel price, where a ban in Indonesia set off a surge. We look at whether Pilbara Minerals could be considered cheap.
Latest lithium news out of Chile points to a shutdown at SQM’s operations
These were the quotes out of Reuters that drove the Pilbara Minerals share price up:
‘Sergio Cubillos, president of the Atacama Indigenous Council, told Reuters a road blockade had shut down SQM’s operations since Wednesday morning.
‘“They’re completely shut down,” he said by phone from the windswept intersection of a local road with SQM’s access route.
‘The roads are closed.’
Pilbara’s Pilgangoora project is in WA, so it won’t face the supply disruptions that SQM is looking at right now.
Reuters reports that indigenous communities in the Atacama region are protesting over social inequality and the environmental impacts of lithium mining.
Political risk is something you must consider when investing in commodity stocks and the developments today underline this.
Will the Pilbara share price continue to rise?
When news broke that Indonesia was pushing forward a ban on nickel exports, it prompted a sustained run up in the nickel price.
Lithium investors may be hoping something similar happens with lithium prices.
A note of caution however.
The fall in lithium prices has been driven by a large amount of major projects being pushed through the supply pipeline.
Until more information emerges regarding how much supply has been taken offline, it could be hard to gauge.
It may only be a brief surge this time around, driven by political events.
All things considered though, if your investment horizon is up to 10 years, Pilbara could be cheap in this environment.
They have a massive operation that is essentially free of political risk.
For Money Morning