Capital Management Framework. Nov 14 2022.The Framework...

Capital Management Framework. Nov 14 2022.

The Framework prioritises allocation of capital first to maintaining safe and reliable
operations, as well as near term productivity initiatives designed to maximise cash being
generated from existing operations. Net operating cash flow generated should then be
allocated to:
• sustaining capital to maintain operational performance;
• further investment into sustainability commitments and initiatives;
• establishing and maintaining balance sheet strength to protect the Company
through all commodity price cycles (inclusive of prudent gearing ratios); and
• paying a sustainable dividend to shareholders, with a target dividend payout ratio
of between 20-30% of free cash flow1
.
1 Free cash flow is defined as statutory cashflow from operating activities less tax paid/payable less sustaining
capital (inclusive of capitalised waste mine development).
Figure 1: Capital Management Framework
Excess cash flow above and beyond these priorities could then be allocated to further
investment to improve the Company’s operations, investment in organic and inorganic
growth and acquisitions opportunities, debt reduction and/or further returns to
shareholders.
Pilbara Minerals’ current strategy is to grow and diversify its business on the back of the
strong cashflows being generated from its operations. To achieve this strategy, the
Company will likely prioritise identified growth paths in the near-term which are expected
to deliver the greatest long-term value for shareholders, ahead of allocating capital to
special dividends, buy-backs or capital returns. Growth opportunities to which capital
might be allocated in the near-term include:
• P680 Project to incrementally expand production capacity at the Pilgangoora
Project to 680,000 dry metric tonnes (dmt) of spodumene concentrate, as well as
deliver crushing and ore sorting infrastructure in support of further expansions. The
P680 Project is currently in development.
• P1000 Project to further expand production capacity at the Pilgangoora Operation
to 1Mtpa. A Final Investment Decision (FID) for the P1000 Project is targeted for late
in the December Quarter 2022.
• Downstream Joint Venture with POSCO to construct a 43,000 tpa Lithium
Hydroxide Monohydrate (LHM) chemical facility in South Korea, including the
possible acquisition of a further 12% interest in the project pursuant to a call option
to increase Pilbara Minerals’ interest in the joint venture to 30%.
• Mid-Stream Project aimed at producing a value-added lithium salt with a lower
carbon intensity for the battery materials industry. The initial investment is likely to
be the construction of a demonstration-scale chemicals facility in joint venture with
Calix (subject to a final investment decision), which will test the commercial and
technical viability of a commercial scale plant.
• Further investment into sustainability commitments and initiatives, and
• Investment in new downstream lithium chemicals opportunities, likely in
partnership with parties involved in the battery materials industry.
A target dividend payout ratio of 20-30% of free cash flow1 has been adopted by the
Company. This target payout ratio is designed to provide a sustainable dividend return to
shareholders, but also reflects the early stages of Pilbara Minerals’ growth cycle, with the
remaining cash flow able to be allocated to organic and inorganic growth opportunities
which are aligned with the Company’s growth and diversification strategy to deliver longterm shareholder value.
Having utilised all prior year tax losses, Pilbara Minerals will commence paying income tax
in February 2023. As a result, the Company is expecting to apply the target dividend payout
ratio of 20-30% of free cash flow for the first time to pay a fully franked dividend for the
2023 Financial Year.


ahead of allocating capital to special dividends, buy-backs or capital returns. Growth opportunities to which capital
might be allocated in the near-term include:


I think that quite clearly states their intentions.