2021-22 is the year when the long talked about lithium boom became very real and very profitable.
We told you earlier this month that Pilbara Minerals has cash coming out of its ears, especially in the June quarter after a very big 2021-22 financial year.
In analysis of the company’s quarterly report we pointed out the surge in output, prices, revenue and cash on balance sheet for the year to June 30.
On Tuesday Pilbara fleshed out those bare bones in its 2021-22 annual report and accounts and confirmed that lithium is now a highly profitable Australian mining business with considerable upside.
While many investors still think of lithium mining and processing as some sort of pie in the sky speculation, Pilbara’s results and those to come from Allkem and IGO, plus Mineral Resources will show that it is as robustly profitable as beach sands, iron ore, copper, nickel and gold.
Pilbara shares ended up 3.1% at $3.27 in a market that ended down 1.2% and looking to go lower towards the end.
Pilbara reported a full-year after-tax profit of $561.8 million for the 2021–22 financial year, which from a 577% increase in sales revenue to approximately $1.2 billion, up from $175.8 million in 2020-21.
“FY22 has been an incredible year for Pilbara Minerals, with our Pilgangoora operation capitalising on the surging demand for lithium raw materials that we have experienced over the course of the year,” Pilbara ’s CEO Dale Henderson said in Tuesday’s statement.
“The restart of the Ngungaju plant during the year, together with capacity improvements at the Pilgan plant enabled increased production volumes to sell into this strong pricing environment.
“The combination of strong operational performance and the significant increase in lithium pricing underpinned a robust inaugural profit result and has transformed the company’s balance sheet from the prior year.”
Pilbara said the result was driven by the “exceptionally strong global demand for lithium raw materials and positive pricing conditions for spodumene concentrate, particularly in the second half of the year.”
And Pilbara said the profit came from the “strong operating performance from the Company’s world- class Pilgangoora Lithium-Tantalum Operation in the Pilbara region of Western Australia, which delivered a gross margin from operations of $853.5 million (FY2021: $46.2 million).
Pilbara confirmed total shipments of 361,035 dry metric tonnes (dmt) of spodumene concentrate (FY2021: 281,440 dmt), of which 315,155 dmt originated from the Pilgan Plant and 45,880 dmt from the Ngungaju Plant, which was re-started, commissioned and in ramp-up during the financial year.
To get the 577% surge in revenue for the year to $1.2 billion Pilbara saw a price boom.
“The average selling price of around $US$2,605 a dmt (SC6.0, CIF China basis), which when adjusted for actual lithia content translated to a realised price of around US$2,382/dmt (CIF China basis),” the company explained.
Pilbara runs a monthly pricing auction through its BMX platform (Battery Minerals Exchange) that is slowly becoming a global pricing standard.
The Pilgan Plant contributed $708.2 million to the gross margin from operations, while the Ngungaju Plant’s contribution was $145.3 million “notwithstanding this plant being re-started, commissioned and ramped up during FY2022.”
Pilbara said the strong operational performance underpinned a substantial increase in EBITDA to $814.5 million, after allowing for corporate and administration costs ($20.9 million), exploration and feasibility costs ($13.9 million) and share-based payment expenses ($5.2 million). EBITDA for 2021-22 was up from the $21.4 million for the 20200-21 financial year.
Pilbara Minerals reported a full-year underlying net profit before tax and acquisition costs of $762.1 million, after recognising $44.9 million in depreciation and amortisation costs, and net financing costs of $6.9 million (excluding deferred consideration costs).
After recognising prior year tax losses of $66.3 million (net of deferred tax balances) and expensing $37.2 million of non-cash deferred acquisition costs relating to the acquisition of Altura Lithium Operations Pty Ltd in the previous year, the Company recorded an inaugural net profit after tax for the year of $561.8 million, compared to the 2021 full-year net loss after tax: $51.4 million.
In his statement, Mr Henderson added “The fact that we have achieved such a strong profit result despite the significant headwinds of COVID-19, the WA mining industry’s labour and supply shortages and rapid cost inflation is testament to the outstanding efforts of our employees and contracting partners, and I would like to sincerely thank them for their hard work.
“Having recently approved the expansion to grow production by a further 100,000tpa to a combined ~640,000-680,000tpa, and with the Company now progressing towards a FID to expand production to 1Mtpa, Pilbara Minerals commences FY2023 in an exceptionally strong position.
“The business is in an enviable position, supplying product into a burgeoning growth market with a clear pathway for further production growth off a performing operating base. Further, chemicals participation with our downstream JV with POSCO and our midstream project provides another extension of value creation for our shareholders. A very exciting future lies ahead for our business and our shareholders.”
