Pilbara Minerals (ASX: PLS, Share Price: $0.37, Market Cap: $319m) is generating strong market interest and share price appreciation as a result of successful exploration, appraisal and pre-production activity on its Western Australian tantalum and lithium resource assets. The company’s key attraction is its low-risk exposure to lithium via its WA Pilgangoora project – a major component in high-tech applications.
The company has mobilized for a major 15,000-metre drilling program at its Pilgangoora lithium-tantalite project over four main target areas to in-fill, upgrade and expand the current global Indicated and Inferred Resource of 80.2Mt grading 1.26% Li2O (Spodumene) containing 1,008,000 tonnes of Lithium Oxide.
Market Significance
The resource upgrade and recent commencement of a Feasibility Study are major project milestones, with the upgrade set to underpin the Pre-Feasibility Study (PFS) that is due for completion by March 2016, as well as the eventual Definitive Feasibility Study (DFS). The upgrade has already confirmed Pilgangoora as one of the biggest new lithium ore (spodumene) deposits in the world. In addition, recently-signed MOUs with various high-quality groups have highlighted the strong level of product interest from potential customers/off-take partners, underlining not only the project’s size but also its strong ore quality.
Announcement Detail – New Pilgangoora Drilling Commences
The company has advised that its 2016 exploration and resource development drilling program at Pilgangoora has commence, initially with drilling to test potential water-bore sites for the future mining operation. Initial ground-water exploration activities involve the drill-testing of 35 potential bore sites within the existing RC drilling database, along with a further 19 drill targets for approximately 1200m within E45/2232.
Reverse Circulation and diamond drilling will then commence during early March, with a total of 15,000 metres of RC drilling planned over the four main target areas within and adjacent to the existing global resource.
Two phases of diamond drilling are scheduled to commence on 1 March 2016, with the initial program of PQ diamond drilling designed to extract samples for further metallurgical test work related to the DFS and to collect a bulk sample to create concentrate samples for product sales and marketing purposes.
Resource extension and exploration RC drilling is scheduled to commence following the completion of the heritage survey in early March and will total 86 RC holes for 8,800 metres. Proposed infrastructure sites for the camp, airstrip, processing plant and potential bore fields at Pilgangoora are included in this heritage survey, which is expected to take approximately two weeks.
In-fill RC drilling is expected to commence on 10 March 2016 and will be carried out on nominal 25-metre centres over the central parts of the Eastern, Western and Central zones and comprise 62 holes for 6,100 metres. In addition, the program will target the north-west extensions of the thick pegmatites at the Central prospect, as well as extensions of the mapped pegmatites at the Southern Prospect to the Monster Prospect in the north.
The expectation is that this program will convert a high percentage of the current Indicated resources to the Measured category in the priority areas, defined or based on the first five years of mining inventory.
Technical Significance
The company is progressing a number of key activities in parallel as part of its strategy to progress the Pilgangoora project rapidly and with the right technical inputs. The next milestone will be the completion of the PFS.
With four rigs soon to be in operation, the company is aiming to both in-fill and upgrade the main Indicated resource zones to Measured status, in order to support the DFS; however with an additional objective of further increasing the overall resource inventory and future reserve growth.
The current drilling phase will also include important metallurgical and geotechnical drilling, sterilisation drilling for key site infrastructure, and water bore drilling to ensure that the mining operation has access to sufficient long-term water supplies.
Pilbara Minerals recently commenced the Definitive Feasibility Study on Pilgangoora, followed the awarding of all key contracts and appointment of consultants. The Study is expected to be completed by July 2016, with the Pre-Feasibility Study (PFS) on track to be released during early March 2016.
Pilgangoora Resource Upgrade
Pilbara Minerals Ltd has announced a significant increase in the Mineral Resource base at its flagship Pilgangoora lithium-tantalum project in WA’s Pilbara region.
The updated Pilgangoora Mineral Resource adds a 54% increase in contained lithium oxide and a 16% increase in contained tantalite, based on all drilling information (including historical) and an additional 94 holes drilled between mid-September and December 2015.
The overall Pilgangoora Mineral Resource now comprises 1,008,000 tonnes of contained lithium oxide and 18.2 million pounds of contained tantalite. If a lower lithium cut-off of >1% is used in reporting, tonnages are reduced but grade increases significantly to 59.3 million tonnes @ 1.44% Li2O containing 855,000 tonnes of lithium oxide.
Technical Significance
Pilbara has increased its overall Exploration Target for Pilgangoora to 100 – 110Mt @ 1.2 – 1.5% Li2O and 175 – 225ppm Ta2O5. RC drilling is scheduled to resume in March 2016 with a focus on further extensions and improvement in the resource categories.
Extensional drilling will focus on the northern extension of the central zones, southern domains, Monster and the newly discovered western domain. Drilling in these zones is expected to result in further significant increases in the overall resource inventory. The total strike length of the mapped pegmatites within the Pilgangoora Project now measures more than 6km!
There are strong first-mover advantages for emerging lithium plays in the current market environment, so Pilbara Minerals’ strategy of advancing Pilgangoora as quickly as possible is a judicious one.
Project Overview
Pilgangoora has now been confirmed as the world’s second largest lithium deposit – and even more significantly one of the highest-grade deposits globally – with the added advantage of having a significant tantalite component that can help reduce operating costs by providing a valuable by-product credit.
The feasibility study is being undertaken on the basis of developing a standalone operation at Pilgangoora with an annualised ore throughput rate of 2Mtpa, producing lithium concentrates targeting the glass and ceramics industry and the rapidly growing global lithium-ion battery market.
As the Pilgangoora deposit also contains tantalum, the DFS will also encompass production of tantalum concentrates, which will provide a by-product credit that will offset the production costs of the lithium concentrate.
Lithium and its chemical compounds have a wide range of industrial applications resulting in numerous chemical and technical uses. A key growth area is its use in lithium batteries as a power source for a wide range of applications including consumer electronics, power station-domestic-industrial storage, electric vehicles and power tools.
Summary
We introduced Pilbara Minerals to our Portfolio around $0.175 during September 2015 – representing a current gain of 111%.
The company’s rapidly growing, high-grade Pilgangoora project provides investors with relatively low-risk exposure (both geopolitically and technically) to lithium. End-users lie within the emerging high-tech battery and energy storage industries, along with a host of other traditional applications. By contrast, the majority of lithium-brine projects are higher-risk due to their location riskier jurisdictions, particularly South America.
The company’s aim is to have Pilgangoora in full production by 2018, positioning it to capitalise on the extremely robust market outlook for lithium. Pilbara Minerals therefore remains firmly within our Portfolio.
