Today AFR article: Mr Henderson said the half-year result was “just the beginning”, with massive growth on the way after the company ended December 31 with $2.23 billion in the bank.

Lithium miner says $1.24b half-year profit just the start

Brad ThompsonReporter

Feb 24, 2023 – 9.02am

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Lithium producer Pilbara Minerals has declared its maiden dividend with more on the horizon after a recent price upgrade in long-term offtake contracts with its big Chinese customers.

Pilbara Minerals will return an interim dividend of 11¢ a share to investors less than three years after its shares were worth not much more than that amount.

Pilbara Minerals chief executive Dale Henderson. Trevor Collens

The company’s biggest customers are China’s Ganfeng – which also mines lithium in WA in partnership with Chris Ellison’s Mineral Resources – General Lithium and carmaker Great Wall, followed by South Korea’s POSCO.

Led by chief executive Dale Henderson, Pilbara Minerals has been dropping grade to maximise production of spodumene, with its 5.3 per cent product fetching an average price of $US4266 a tonne in the September quarter, and its 5.4 per cent grade fetching $US5668 a tonne in the December quarter.

The revised off-take contracts didn’t take effect until just before the end of a half year where Pilbara Minerals posted a whopping net profit after tax of $1.24 billion, up almost 1000 per cent from $114 million at the same time last year.

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Sales revenue hit $2.18 billion, up from $174.7 million, on the back of big increases in production and pricing, and earnings before interest, taxes, depreciation and amortisation climbed to $1.81 billion.

The results and fully franked maiden dividend, representing a return of about $330 million to shareholders, come five years after Pilbara Minerals started shipping spodumene concentrate from its Pilgangoora mine about 120 kilometres south of Port Hedland.

They came in the face of higher operating costs the company said reflected labour shortages in the WA mining industry, an elevated strip ratio to support further investment in mining activities, supply chain disruptions and inflationary pressures.

Mr Henderson said the half-year result was “just the beginning”, with massive growth on the way after the company ended December 31 with $2.23 billion in the bank.

The maiden dividend reflects a policy for paying out between 20 per cent and 30 per cent of free cashflow.

“This [dividend] is a huge milestone for Pilbara Minerals, and we are very pleased to be able to reward our shareholders who have had faith and stuck with us over the journey,” Mr Henderson said.

“This strong financial performance provides the company a great platform, supporting our growth and diversification strategy to become a leading, sustainable battery materials supplier.

“The combination of a world-class asset, operating expertise and team spirit is coming together and delivering into a growing market. The stage is set for Pilbara Minerals to take massive growth steps in the months and years ahead. This is just the beginning.”

Pilbara Minerals is moving to boost production from 580,000 tonnes a year to 680,000 tonnes a year, with associated plant upgrades and additional crushing and ore sorting capacity expected to cost more than $404 million.

Mr Henderson shares the view of US-based battery minerals giant Albemarle, which has a growing footprint in the WA lithium industry, that China will remain an important partner.

“I think they will be a key customer for Pilbara for a long time yet just because of the structural landscape that has evolved,” he said earlier this month.

“The lithium-ion industry is essentially completely domiciled in China, bar some emerging shoots elsewhere, so we have had to make the choice to work with China and our customers have been fantastic partners in the main.”