Pilbara Minerals shelves special dividend as lithium price dips

West Australian producer Pilbara Minerals has shelved plans to pay a special dividend or buy back its own shares after a steep fall in lithium prices last quarter.

The Pilbara Minerals share price fell 1.4 per cent to $3.82. It reported a 42 per cent fall in revenue in the three months to September 30.

Pilbara Minerals CEO Dale Henderson. Trevor Collens

Pilbara Minerals has become the most shorted stock on the ASX as investors take a bearish view on lithium, at odds with the optimism of billionaires such as Gina Rinehart and the major global players vying for WA projects.

Dale Henderson-led Pilbara Minerals reported revenue of $493.1 million in the September quarter, from $868 million in the June quarter. The fall reflected a 31 per cent slide in the price received for its spodumene concentrate to $US2240 ($3552) a tonne and lower production.

Operating costs jumped 19 per cent to $747 a tonne as the company pushed ahead with a major expansion at Pilgangoora.

The company received an average price of $US4447 a tonne for spodumene concentrate over 2022-23 when it posted a net profit of $2.4 billion and flagged paying a special dividend or undertaking a share buy back.

On the shorting of the stock, Mr Henderson said Pilbara Minerals was in some ways a victim of its own success.

“There appears to be a component of the market that wants to short lithium pricing and given that there’s no available mechanism to do that they have gravitated it would appear to Pilbara as a proxy for the lithium market because of our scale, pure play exposure and our liquidity,” he said.

Mr Henderson said demand for spodumene remained strong and that Pilbara Minerals had no trouble moving product.

Fellow producer Allkem, which is in the throes of a merger with processing specialist Livent aimed at creating a New York-listed $US10.6 billion lithium giant, said demand had been softer than expected in the September quarter.

“Procurement activity has been conservative as customers have kept a wait-and-see approach, putting renewed downward pressure on lithium prices,” Allkem said as it reported record production from its Mt Cattlin mine in Western Australia.

Pilbara Minerals said market conditions had softened in a period where the group is undertaking major capital investments. It is targeting producing a million tonnes of spodumene concentrate by 2025-26, but may opt to aim higher based on an ore reserve boost.

Mr Henderson said the company was looking beyond volatility in lithium prices to a longer-term structural supply deficit.

Interest from potential partners in downstream processing remained strong, he added. Pilbara Minerals went to the market offering a partnership based on access to the more than 300,000 tonnes a year of spodumene from Pilgangoora; it will provide an update on the process in the March quarter.

Mr Henderson said the shortlist of potential partners was down to about 10 major counterparties in lithium.

It is already building a lithium hydroxide plant in South Korea in partnership with POSCO.