Pilbara Minerals Ltd (ASX: PLS) shares are going to be in focus next week as the ASX lithium share reports its quarterly update for investors.
It’s going to tell us about the three months to 30 June 2023.
While these updates aren’t quite as informative as the half-year or full-year result, they can give investors a good indication of how much revenue the business has made and some of its costs.
What is the ASX lithium share going to report?
Pilbara Minerals normally shares with investors how much production it achieved, its shipments, the average sales price for its production, the unit operating costs and how much cash it had at the end of the period.
There are a number of forecasts out there, but my colleague James Mickleboro reported on the thoughts of Goldman Sachs.
The investment bank suggests that Pilbara Minerals could achieve spodumene (lithium) production and sales of 160,000 dry metric tonnes (dmt). This is more than the average of what other analysts think it will be (of 153,000 dmt).
Goldman Sachs also suggests that Pilbara Minerals may report a quarterly realised price of US$4,432 a tonne for its spodumene. This would be better than 12 months ago, though down 10% from the three months to 31 March 2023.
Goldman Sachs suggests that the cash costs, including freight and royalties, could be US$470 per tonne. This would be up 8.8% from the three months to 31 March 2023. However, the analyst consensus is for cash costs to be US$565 per tonne for the three months to 30 June 2023.
Is the Pilbara Minerals share price a buy?
According to the ASX, it has a market capitalisation of $15.3 billion. At the end of March 2023, it had almost $2.7 billion of cash, so a decent portion of the valuation is backed up by its balance sheet.
It seems very promising for the company that the lithium price is higher than it was a year ago. I don’t think those prices we were seeing near the end of 2022 were going to last. At the current lithium price, it’s making good profit.
If lithium remains the key battery resource, then Pilbara Minerals could have a very strong future because lithium demand is expected to rise. McKinsey suggests that annual global lithium demand will grow by 20% annually to 2030.
However, I’d suggest the Pilbara Minerals share price has largely taken this into account, with a rise of 36% over 2023 to date.
According to Commsec, the ASX lithium share could generate earnings per share (EPS) of 56 cents in FY24. This would put the company at under 9 times FY24’s estimated earnings.
If lithium prices stay at around this level for the long term, I think the current Pilbara Minerals share price could be a great long-term performer, particularly if it executes well on its expansion plans to grow its production and be more involved with the lithium value chain. Dividend payments will help shareholder returns.
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