Not advice, just may opinion based on my research of sector, including company announcements.....
PLS still has some puppy fat, only in production for 3 years, 18 months of which was at below nameplate, due to 2018 & 19 oversupply. They do have decent list of short and medium term growth initiatives.....
Sector and cycle wise, I'd say we are only 8 to 9 months in the new cycle, which is expected to be sustained for the next few years, as you say. Upstream is already struggling to meet demand, and while lithium prices has punched higher very quickly due to said demand, IMO there's room for further increases through 2023. While there is new supply expected to come online in 2024 and therefore we could see prices stall, or pull back a bit, though never underestimate the demand side of the equation. Any stall or pull back in prices will be short lived, given 2030 "battery quality (BQ)" demand profile, which ranges between 2.8 & 3.3twh. Splitting those estimates down the middle, 3.05twh of demand would consume 2.56 million tonnes of battery grade lithium, which is a 632% increase over 2020 calendar year production.
That level of demand growth is unheard of in the general commodities complex, so a very big ask for an immature lithium sector, which produced 350kt of LCE in 2020 calendar year. Note, that ~70% of said 350kt of LCE was consumed by batteries, the rest used in greases, ceramics and door mats....
It's also very important to consider that lithium isn't easy, thus of all the new nameplate (paper) supply announcements, historically, only 80% of that supply comes on line. So once again, a very big ask, and a huge risk to the investment being deployed downstream at Cell & EV OEM's (end product). I'd say the downstream actors are already suffering a mild case of flinching freckle syndrome, and IMO, it could be fatal for a few as 2025 approaches.
Back to this company;
I'm sure you are aware the company will ramp up production of spod by ~250kt over the coming 12 months, 200kt of which (Ngungaju Plant) is not under long term offtake contracts and will be sold on the Battery Metals Exchange (BMX) platform, fetching spot prices witch are already pushing towards US$1,000pt.
Overall, spod production is expected to be 580kt by end of 1H 2022 calendar year, generating gross margins of US$242 mill (AUD$323 mill), noting there is ~$200 mill in carried forward losses, thus saving $60 mill in tax on the first $200 mill. Though don't expect a dividend any time soon, as those profits will be recycled back into company growth initiatives, as follows;
The company plans to be an integrated producer, producing lithium chemicals and/or part finished product.
They are at the pointy end of establishing a joint venture (JV) with POSCO Chem, participating with a 30% holding in a 43kt South Korean lithium hydroxide plant, for which BQ hydroxide is now fetching US$16,500pt (AUD$22k). They will supply and sell 315kt of spod (or part finished salts) to the JV.
The company has a scoping study with Calix to develop a mid stream lithium salt, which can be converted to lithium hydroxide or carbonate. Calix have a kiln technology which can be powered by electricity, thus renewables. If the scoping study is positive, both PLS and Calix will JV on a pilot plant at mine site, where they can produce the midstream salt, which is 6x 6% spod concentrate. If that plays out well, PLS will substantially lower the CO2 footprint, shipping ~25kt of midstream salt instead of 100kt of spod around the world. That midstream product is highly suitable for densely populated regions, as the waste product of spod production remains at the mine.
The company also plans to use solar and possibly wind for their operations, not to mention the "Asian Renewable Energy Hub" being built just down the road in the Pilbara. At some point, that hub could supply renewable energy to meet all PLS operational needs.
Long story short, plenty of growth initiatives for both the sector and the company, and maybe a sweet spot, as said.
Good luck, not advice, please DYOR.
PLS Price at posting:
$1.49 Sentiment: Hold Disclosure: Held
(20min delay)