...PLS came out with this planned production expansion but the market was not enthused about it, its stock price only went lower post announcement.
...Everything hinges on what the SC price would be in 2025, PLS is obviously hopeful of a price recovery. But the price has not just stopped going higher or stagnating, it has been dropping (see below).
....market may be more concerned about PLS burning away its cash war chest.
....but this planned expansion only serve to reinforce the view that
1. the bigger lithium players know that going forwards its a volume game, less about price; i.e you grow revenues by producing and selling more despite new normal loss price
2. industry supply for lithium will expand, there won't be a deficit imbalance so price won't go higher despite EV growth.
Let me expand further on (2) above.
If a high capital intensive DLE lithium plant is being built in Americas and with Chinese spending billions into African mines, they are not going to stop the project despite lithium price being marginally above their variable opex cost. Because if they suspend operations, they would still need to service their loans without cashflows, layoff workers and re-commissioning of plant would be costly. This offers an advantage for DLE because their opex/MT cost is lower than hard rock
{ DLE also has comparable operational expenditures (OPEX), ranging from USD4,500 to USD7,500 per tonne of LCE compared to solar evaporation’s OPEX (ranging from USD4,800 to USD8,000 per tonne of LCE). In contrast, the OPEX of hard rock mining ranges from USD6000 to USD18000 per tonne of LCE .}. Plus lithium plants in Chile and Africa which are supported by the Govt as they view it as their export earner could easily defer loan repayments if lithium price were to fall below variable cost of production. Just like some Chinese plants operating at a loss on continued production because shutting the plant would be a worse option, they would lose the contract to supply. Pilbara Minerals eyes $800 million road to double lithium output
Pilbara Minerals, Australia’s biggest independent lithium producer, on Friday laid out a A$1.2 billion ($799.2 million) plan to double production capacity for lithium spodumene at its Pilgangoora operation in Western Australia.
More spodumene from the miner’s flagship operations could result in a decade of output averaging 1.9 million tonnes per year if it decides to press go on the project, following a feasibility study expected to be completed in late 2025.
The expansion would require Pilbara Minerals to build a new flotation plant for extracting lithium from the spodumene that would be adjacent to an existing flotation plant to constrain costs. The plan is being laid out as Pilbara keeps its options open for future production amid low prices for the battery material.
“We expect the full suite of funding options to be available for us, which could include cash flow from our operations, and government support. We could look at offtake and finance as well as debt and equity,” CEO Dale Henderson told Reuters.
Pilbara had A$1.8 billion in cash on its books as of March 31, 2024.
The output plan is separate to Pilbara’s study to process its spodumene into a more lithium-rich product that could be sold at higher margins, for which it is building a demonstration plant with Calix Ltd, he said.
The demonstration plant will trial electric calciner technology to make a lithium phosphate product containing 18% lithium, up from 5% to 6% contained lithium in spodumene.
The trial may yield learnings that could apply to other projects around the world, and offer Pilbara another revenue stream through licensing, Henderson said.
Pilbara earlier this year agreed to a study with China’s Ganfeng Lithium on options to build a 32,000 metric-ton-per-year lithium conversion facility.
The site for the plant has not been decided but a number of countries are being considered, including Australia.
Pilbara’s shares fell 3.8% to A$3.08, amid weakness in lithium miners, while the broader mining sub-index dropped 0.3%.
