Pilbara Minerals lifts lithium spodumene offtake prices to US$6,300

Wed 21 Dec 22, 12:30pm (AEST)
Loaded cargo ship
Source: iStock

Key Points

  • Pilbara Minerals has revised lithium spodumene pricing agreements with major offtake partners
  • From December 2022 onwards, major customers will pay US$6,300/dmt
  • The average sale price was US$2,382/dmt in FY22

Pilbara Minerals (ASX: PLS) said it achieved a 'significant improvement in pricing outcomes' with major offtake customers, lifting its average spodumene price to approximately US$6,300/dmt.

Pricing power

The revised offtake pricing will apply for all shipments to the company's major offtake partners from December 2022 onwards.

To add some perspective, the average realised selling price in FY22 was US$2,382/dmt at production costs of approximately US$565/dmt (76.8% margins).

Market prices for spodumene was US$5,480/dmt, according to the company's FY22 results presentation.

Inflation hits expansion plans

On 29 June 2022, the Board approved the capital investment for the 'P680 Project' to boost the Pilgan Plant's annual production by 100,000 dmt to ~640,000 to 680,000 dmt.

The P680 Project was set to cost $297.5 million for larger crushing facility and rejection circuit. However, the increased cost of materials, equipment and quantities of work has bumped costs 35.9% higher to $404 million.

Eyes on 1 million tonnes

In parallel, the Board approved pre-FID (final investment decision) funding for the P1000 Expansion Project – set to increase annual spodumene production to up to 1 million tonnes per annum.

The $38.3 million pre-FID funding will support front-end engineering design and the procurement of long-lead equipment to support the delivery of P1000.

"The delivery of the P680 and P1000 expansion projects will cement Pilbara Minerals’ position as a major supplier of essential lithium raw materials required for the global energy transition," said CEO Dale Henderson.

Dividends on the horizon

On 16 December, Macquarie reaffirmed an OUTPERFORM rating for PLS with a $7.60 target price.

The analysts forecast FY23 adjusted profits to come in at $2.72 billion, up 385% from the $561.4 million in FY22. This will feed into a maiden dividend of 34 cents per share, which divided by the target price, assumes a dividend yield of 4.5%.

PLS chart
Pilbara Minerals 12-month price chart


Written By

Kerry Sun

Content Strategist

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

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