Judging by another very strong quarterly report from Pilbara Minerals on Friday, there’s no sign of the lithium boom dying, as more than few analysts and others have been claiming recently.
The upshot of the second strong quarterly performance in a row sees Pilbara Minerals sitting on a massive cash pile of more than $A2.2 billion at the end of December.
That’s no wonder – in the three months to December, its average price rose by a third, its average cost per tonne fell 5% and the amount of spodumene sold was up 10%.
The company told the ASX on Friday that it enjoyed a “substantial” $851.1 million increase at the end of the December quarter to $2.226 billion and up from the September Quarter’s $1.375 billion.
There’s actually more cash to come – the pile will total over $2.4 billion with other receipts of $210.6 million for as yet unpaid for shipments still to be included.
That’s why newish CEO Dale Henderson was very happy on an investor brief call on Friday when he commented, “It’s all coming together at the perfect time. What an amazing quarter we’ve had.”
Production for the quarter was 162,151 dry metric tonnes (dmt) of spodumene concentrate up around 15% from September Quarter” 147,105 dmt. Shipments – 148,627 dmt of spodumene concentrate up 7% from the September Quarte’s 138,249 dmt).
Besides Pilbara supplying its offtake agreements and spot sales, it moved 25,000 dmt through its Battery Materials Exchange (BMX) auction platform.
Production for the six months to December totalled just over 309,000 tonnes while sales were nearly 287,000 tonnes (comparisons with the same period in 2021 not meaningful).
Pilbara saw an average realised spodumene concentrate sales price ~$US$5,668/dmt (CIF China), up from the September Quarter figure of $US4,266/dmt.
That means the company will report not only a massive profit next month for the six months to December, but will also signal how shareholders will be rewarded when the full 2022-23 results are released this August.
“Having utilised all prior year tax losses, Pilbara Minerals will commence paying income tax in February 2023,” the company said on Friday.
“As a result, the Company is expecting to apply the Capital Management Framework to paying a fully franked dividend for the first time based on the 2023 Financial Year results.”
Mr Henderson admitted on the investor call that the company has thought seriously about bringing forward the dividend payment to February and the half year.
“Costs for the Quarter continued to be impacted by labour shortages in the WA mining sector, supply chain disruptions and general inflationary cost pressures, as well as an elevated mining strip ratio as the Company continues to undertake substantial investment in mining activities.
“Unit operating costs for the Quarter were lower compared to the September Quarter 2022 and benefited from economies of scale from improved production, lower maintenance costs with one less shutdown during the Quarter, lower fuel costs following reinstatement by the Australian Government’s temporary reduction in diesel fuel tax credits, but offset by higher labour costs and the effects of general inflationary pressures.
“Whilst freight rates reduced during the Quarter, royalty costs increased in line with the higher spodumene concentrate selling price,” the company said.
In December, Pilbara Minerals announced it had completed price reviews with its offtake customers, with the company fetching $US6300/dmt on a SC6.0 basis for offtake shipments that fell within December 2022 and onwards
During the quarter, Pilbara received proceeds of $1.135 billion from spodumene concentrate sales to customers (inclusive of $1.1 million in receipts following completion of final pricing adjustments for September Quarter 2022 cargoes that were provisionally priced); interest income of $11.0 million; proceeds of $1.0 million from the exercise of share options; and $5.4 million in foreign exchange gain, including settlement of foreign exchange contracts to convert USD denominated customer receipts.
Pilbara said its top two major costs for the quarter were $185.5 million for operating costs to produce and sell spodumene concentrate and $73.1million on capital costs, including works for the P680 Expansion Project, capitalised deferred mine waste development costs associated with mining activities ($34.5 million), as well as other sustaining and development capital projects across the Pilgangoora Project.
Pilbara said that it “expects to provide any update to its FY2023 Guidance with the release of its FY2023 half year result in late February 2023.”
Mr Henderson if confident that Pilbara’s success will continue. He points out there is a structural change under way as the United States and Europe boost up electric vehicles and accelerate economy-wide cuts to greenhouse gas emissions (on top of record numbers of EV and hybrid sales in China that could top 8 million this year, or around 40% of total car sales in 2023).
The recent Australian government endorsement of Pilbara’s critical minerals project with a $250 million 10-year debt facility would support the business in the long-term on the global market, he said.
Not simply meeting rising world demand for critical materials, the miner is also pushing ahead with its own decarbonisation and sustainability credentials (it has to because that is what is being demanded of all companies).
A six-megawatt solar farm, which is the first major step to decarbonising the Pilgangoora Project near Port Hedland in Western Australia’s Pilbara, began generating and supplying power during the last quarter.
The solar farm is expected to displace about 3.8 million litres of diesel fuel annually, saving an estimated 9,900 tonnes a year of carbon emissions.
This quarter and probably the June quarter as well will see some easing of prices for lithium hydroxide and carbonate as Chinese prices ease.
Lithium prices have fallen around 20% in China from November to 480,500 yuan a tonne ($US71,500) on last Friday, the lowest since August.
But with such low production costs, Pilbara can withstand lower prices and like a mature company, adjust returns to shareholders to absorb any negative impact from lower prices.
It’s no wonder Pilbara Minerals shares leapt more than 12% on Friday to $4.55.
