Pilbara Minerals has shrugged off the recent malaise around the lithium sector, raising $US100 million ($132.7m) in bonds to break the back of the financing needs for its proposed lithium mine.
Perth-based Pilbara will announce today the results of its bond issue, which is understood to have pulled in investors from Australia and overseas.
The issue shaped as the single biggest component of the funding for Pilbara’s $234m Pilgangoora lithium mine near Port Hedland, and will clear the way for Pilbara to crank up construction activity at the project.
The company announced its plans to tap bond markets for $US80m-$US100m in funding almost a month ago, and the lack of an update in the weeks since then had fuelled concerns that the bond issue was struggling for traction.
Some of the investor excitement around lithium has abated this year, with Pilbara shares having fallen more than 34 per cent from their January high. Lithium miners Galaxy Resources (down 39.4 per cent) and Orocobre (down 19.5 per cent) have also dropped over the same time.
It is believed the bond will attract an interest rate of about 12 per cent, which will be considered a win for Pilbara given the greenfields nature of Pilgangoora, the opaque and little understood nature of the lithium market, and Pilbara’s status as a single-project company.
Pilbara’s corporate advisers on the bond issue were Pareto Securities and BurnVoir Corporate Finance.
Pilbara had $65m in cash at the end of March so it will still need another raising to fund the balance of Pilgangoora’s capital cost. But the company’s recent offtake agreements with China’s Jiangxi Ganfeng Lithium included a provision for Ganfeng to contribute at least $US20m in funding the project, leaving only a small funding gap to be filled. But the potential early cash injection from a previous deal to sell high-grade material from Pilgangoora as direct shipping ore now looks increasingly unlikely.
Pilbara noted in a recent corporate presentation that a $US10m prepayment for the ore from Chinese group Shandong Ruifu Lithium had not been received and remained “uncertain”. The company said it had been approached by other parties interested in the direct-shipping ore, with alternative deals now under consideration.
The company, which is led by former Atlas Iron chief executive Ken Brinsden, has been one of the most prominent Australian companies to emerge on the back of the growing interest in the lithium space in recent years.
Demand for lithium has been rising sharply in recent years amid the growth in electric vehicles such as the Tesla, although there have been concerns from some corners that the growth in demand could be outpaced by a surge in global supply.
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