Pilbara Minerals navigates lithium downturn with Q1 output beat, lower guidance and cost cutting
Pilbara Minerals is managing everything that's within its control – production, operating costs, capex and future expansions
Source: Pilbara Minerals
Mentioned
KEY POINTS
- Pilbara Minerals beat Q1 FY25 consensus with production 8.3% above expectations and costs 13% below, demonstrating strong operational performance despite falling lithium prices
- Company will temporarily close its higher-cost Ngungaju plant from December 2024, revising FY25 guidance with lower production but improved cost efficiency
- Pilbara has outperformed lithium peers, down only 21.5% over 12 months versus 40-60% sector declines, while maintaining a solid $1.4bn cash balance
Lithium prices might be in free fall but Pilbara Minerals (ASX: PLS) is managing everything that's within its control – production, operating costs, capex and future expansions. The stock opened 1.75% lower but aggressively rallied to a 5.3% gain as at 11:30 am AEDT.
Pilbara Minerals has been one of the best performing lithium stocks (in a relative sense), down 21.5% in the past twelve months compared to most other mid-to-large cap names that are down between 40-60%. Only Arcadium Lithium has managed to outperform in recent weeks, after landing a US$6.7 billion takeover offer from Rio Tinto (approx 90% premium to last close).
One year performance comparison between Pilbara Minerals (blue) vs. Arcadium Lithium (red), IGO (purple), Liontown Resources (yellow) and Sayona (green) | Source: TradingView
A clean sweep
The first quarter FY25 report broadly beat market expectations across several key metrics, including:
Production down 3% QoQ to 220kt (consensus: 203kt)
Realised price down 19% QoQ to US$682 a tonne
Revenue down 31% QoQ to $210 million
Unit operating cost (FOB) up 3% QoQ to A$606 a tonne (consensus: A$696 a tonne)
Cash balance down 17% QoQ to $1.4 billion
The quarter showed strong operational execution, with production and costs both beating consensus expectations – production was 8.3% above consensus expectations while costs were 13% lower than expected.
Pilbara said the reduction in production volume was anticipated and reflected the reduced plant availability resulting from the integration and ramp up of the P680 crushing and ore sorting facility.
In terms of project development, Pilbara continues to progress a number of initiatives.
P1000 Project progress to schedule and budget. The project is over 80% complete, with first ore targeted for the March quarter 2025.
Downstream JV with POSCO continues to ramp up. During the quarter, the JV continued to ramp up production at Train 1 and completed construction of Train 2 at its lithium hydroxide facility in South Korea. Train 1 achieved 50% of its nameplate capacity in August, while 97% of the production met battery-grade specifications. During the quarter, the JV secured an additional US$150 million in debt facilities to fund working capital for ramp up and commissioning.
Mothballed mid-stream demonstration plant: Pilbara Minerals and Calix Limited have decided to defer construction works not currently under contract for the Mid-Stream Demonstration Plant Project due to current market conditions. The company said it will remain paused until "market conditions are supportive or further government support for project continuation can be secured."
No major updates for P2000 and Latin Resources acquisition. A feasibility study for the P2000 expansion will be delivered in the December quarter 2025 while the proposed acquisition of Latin Resources remains subject to shareholder and regulatory approvals.
Revised FY25 guidance
Pilbara shares are likely rallying off the revised FY25 guidance, where production cuts are forecast to lower operating costs and capex.
"In response to current lithium market conditions, near term outlook, and the ramp-up of newly expanded processing facilities at the Pilgangoora Operation, the Company is intending to optimise the Pilgangoora Operation to a single processing plant via the Pilgan plant," the report said.
"Production at the higher cost, lower capacity Ngungaju plant will be placed into temporary care and maintenance from 1 December 2024."
The revised FY25 guidance includes (at the midpoint):
Production down 13% to 700-740kt (from 800-840kt)
Unit operating costs down 6.6% to A$620-640/t (from A$650-700/t)
Capex down 9.6% to $565-610 million (from $615-685m)
The new guidance also slightly lowered costs associated with growth capital, mine development, sustaining capex and infrastructure
All current offtake commitments can be met under this production profile
In the current low lithium price environment, Pilbara is delivering exactly what investors seek – maintaining FY24 production levels into FY25 while reducing both operating costs and capital expenditure. Its always worth noting that Pilbara is the most shorted stock on the market (19.47% short interest as at 23 October), which can drive increased volatility in the share price.
