Average annual production would be 1.9 million tonnes over the first decade of the project.
The Pilgangoora hub is already Australia’s second-largest lithium producer and would match the scale of the nation’s biggest and best lithium mine at Greenbushes, also in WA, if the 2 million tonne per year study was adopted.
Pilbara said it would need to spend about $1.2 billion to build the processing facilities, tailings dams and other infrastructure to support the expansion to 2 million tonnes per year.
That $1.2 billion price tag does not include the cost of building a new mine, and analysts believe the project would cost closer to $1.5 billion once the mine was included.
Mr Henderson said the long-term outlook for lithium was very strong, despite the 80 per cent slump in prices over the past 18 months, and he vowed to focus the company on that long-term growth.
“Pilbara has always had its eyes trained on the long-term prize, which is to be a scale operator in what is just an incredible growth market,” he told AFR Weekend.
“That trajectory, in terms of compounding annual growth rates for lithium, it continues despite some of the negative sentiment these last couple of weeks.”
Pilbara said the expansion would pay for itself in about three years if benchmark prices for spodumene concentrate with 6 per cent lithium content averaged $US1500 a tonne over the life of the project.
That price assumption was higher than this year’s peak in spodumene prices, which occurred early last month at $US1240 a tonne. The price has slipped since then, with S&P Global Platts reporting it at $US1050 a tonne on June 20.
But Pilbara said the expansion to 2 million tonnes per year would still be value accretive on a net present value basis if the benchmark price for spodumene with 6 per cent lithia content was $US1000 a tonne.
Macquarie analysts believe supply of lithium will exceed demand over the next two years, driving spodumene prices down to an average of $US975 a tonne in 2025, before recovering to be $US1925 a tonne by 2028.
Goldman Sachs is more pessimistic, predicting prices will average between $US530 and $US610 a tonne in 2025 and 2026.
Mr Henderson said he would be mindful of the delicate balance between supply and demand when taking a final investment decision on the 2 million tonne expansion in late 2025.
“We are at pains to reassure everyone that we will be thoughtful and disciplined about how we will trigger these growth steps as we have done in the past,” he said.
“This is not our first rodeo, we have been very thoughtful and disciplined I think around the stages of incremental expansion we have done historically, and we will continue to do so.”
Expanding Pilgangoora to produce 2 million tonnes of lithium per year would shorten the mine life to 23 years; rather than the 34-year lifespan expected if the mine produced 1 million tonnes per year.
Pilbara Minerals shares slumped 3.9 per cent in early trading on Friday. The stock has lost 25 per cent of its value over the past month, and was 38.7 per cent lower than a year ago on Friday.
Shares in rival lithium exporter Mineral Resources were 6.5 per cent lower on Friday.
The recent slide in spodumene prices has created a baptism of fire for Liontown Resources, which is due to start production at its Kathleen Valley lithium mine within the next two months, and is likely to be cash-flow negative in its early months of production until it can ramp up volumes and lower its unit costs.
PLS Price at posting:
$3.09 Sentiment: None Disclosure: Held
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