Pilbara Minerals [ASX:PLS] Shares Rise on March Quarter Update

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Lithium producer Pilbara Minerals [ASX:PLS] rose on Thursday after achieving production guidance despite COVID impacts.

Enjoying the strong interest in the EV-boosted lithium theme over the past 12 months, Pilbara Minerals shares are up 130% during the period.

However, the PLS stock is down 15% year to date, trading 30% below its 52-week high:

 

Source: Tradingview.com

Pilbara Minerals’ steady March quarter

Production and sales

PLS explained that ‘resourcing shortfalls in staff and contractors as a function of COVID-19’ meant only 81,431 dry metric tonnes (dmt) spodumene was produced (2,045 less than the previous quarter).

58,383 dmt spodumene was shipped, which was 20,296 less than December’s quarter due to ‘port delays’.

Pilbara Minerals achieved spodumene prices of around US$2,650 dmt for the quarter:

Source: Pilbara Minerals

Lithium

On Wednesday, Pilbara Minerals staged its fourth Battery Material Exchange (BMX) auction, with the top bid of US$5,650 dmt of contracted-sales cargo.

That’s over double PLS’ previous auction price of US$2,350.

Pilbara Minerals said:

Pilbara Minerals envisages that auctions will be held on a more regular basis as Ngungaju production continues to ramp-up and more uncommitted tonnes become available. The pricing received on the BMX sales trading platform is indicative of the critical shortage that exists in respect of lithium raw material supply.

The sale further differentiates the emerging spot-market for spodumene sales, as compared to the typically longer-dated offtake sales arrangements and highlights how well Pilbara Minerals is placed to participate in this market and outperform its peers in respect of sales price received.’

Strong pricing for battery-grade chemicals is believed to improve offtake sales for the June quarter:

Source: Pilbara Minerals

Projects

Commissioning of the Pilgan Plant Improvements Project has begun, increasing capacity to 330,000–380,000 tonnes of spodumene concentrate annually.

Ngungaju production and the Pilgangoora and Mid-Stream project assessments have also begun.

Corporate

Reported operating cash flow totalled $113.9 million, bringing Pilbara Minerals’ cash balance to $284.9 million.

PLS share price outlook

Pilbara cautioned that complications relating to COVID-19 are expected to cast some uncertainty on its operations next quarter.

However, the wider macro story is still holding strong.

Leading price intelligence firm Benchmark Mineral Intelligence reported that spodumene fetched ‘US$76,700 a tonne in March — up 95% since the start of the calendar year.’

Pilbara Minerals also pointed out that lithium carbonate prices in China have ‘increased by approximately 472% from a low last June to a record high on March 15.’

Pilbara Minerals’ auction approach is well-suited to capturing most of the rising spot prices, as some other producers seek to renegotiate longer-dated contracts to better reflect current prices.

Now, most of last year’s top-performing stocks were lithium stocks, and the prices Pilbara Minerals reported today suggest the lithium boom is still raging.

But for how long?

How much of the lithium demand story has been absorbed by the markets already?

The more capital flows into the sector, the harder it may be to extract outsized returns.

But what if there was a smarter — and less discussed — way to play the lithium story?

In our latest research report, we may have found it.

It involves what you might call lithium’s ‘little brother’.

Access the ‘The NEXT Lithium?’ report to find out more.

Regards,

Kiryll Prakapenka,

For Money Morning

About Kiryll Prakapenka

Kiryll Prakapenka is a research analyst focusing on investigating the biggest trends in investments. Kiryll brings sound analytical skills to his work, courtesy of his Philosophy degree from the University of Melbourne. A student of legendary investors and their strategies, Kiryll likes to synthesise macroeconomic narratives with a keen understanding…

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