Pilbara Minerals wins US$460m loan from Korean government banks for battery plant

Pilbara Minerals (ASX: PLS) confirmed its receipt of a US$460m year-on-year debt facility to fund capex for a 43,000 tonne per annum (43ktpa) lithium processing plant in South Korea on Monday. 

The Korea Development Bank (KDB) and The Export-Import Bank of Korea (EIBK) are the entities providing the facility in question. Both banks are government-owned. 

The Lithium Hydroxide Monohydrate (LHM) plant in question will be constructed as part of a JV with South Korean steelmaker POSCO. It is being built in Gwangyang, SK. 

EV battery demand 

LHM (or just lithium hydroxide in general) is a gold-standard feedstock for use in Electric Vehicle (EV demand). 

Last week, Macquarie analysts highlighted expectations the pace of global EV sales could slow by nearly half in 2023 vs. 2022, but elevated lithium prices remain the quo. Lithium retains its status as the “household name” battery metal.

The London Metal Exchange (LME) kicked off a futures product for lithium hydroxide back in 2021. 

The weekly price for one kilogram at 23 February 2023 sat at US$75.50. That number is down from the week of 2 February 2023 where prices reflected US$79.00/kg. 

Looking at tonnes, the 'Month 1' contract expiring Tuesday 28 February 2023 sat at US$76,200 per tonne. 

The ‘Month 2’ contract expiring late March is lower at US$75.5k/tn and that figure remains flat for the remainder of the year as at 10:55am AEST Monday 27 February 2023. 

Pilbara seeking to embed itself in supply chain 

“The POSCO Pilbara JV represents a key element of Pilbara Minerals’ downstream processing strategy, enabling the Company to become an integrated lithium raw materials company,” Pilbara Minerals CEO Dale Henderson said. 

“Building on our strong relationship with POSCO, we are delighted to be jointly establishing a strong foothold in South Korea’s emerging battery materials industry at the door step of established major battery manufacturers.”

Construction underway 

Construction is already underway with the first ‘train’ (read: manufacturing assembly line) to go live in late CY23 with an output capacity of 21.5ktpa of LHM. Shovels first hit the ground last year. 

The second 21.5ktpa train is expected to go live “from the March 2024 quarter” for a total capacity of 43ktpa of LHM. 

Pilbara retains option to boost stake to 30% 

Both PLS and POSCO have already contributed respective shares of first-stage funding with Pilbara Minerals currently holding an 18% equity participation. Pilbara retains an option to bump-up to 30%. 

Its existing 18% stake was funded through a 5-year convertible bond agreement with JV partner POSCO. 

The 7-year debit facility inked on Monday sees repayments trigger two years from drawdown. It includes both a fixed and variable interest rate with the first 50% of funds fixed, and the second 50% under a variable rate. 

A look at Pilbara Minerals' one year performance charts vs. the ASX200