Lithium

Pilbara Mins inches higher following lofty government loan

By Market Index
Fri 11 Nov 22, 1:43pm (AEST)
Cash
Source: Unsplash

Key Points

  • Pilbara Minerals secures $250m in loans from government agencies
  • New funding has been earmarked to build and expand the Pilgan Plant
  • Citi recently downgraded the company to Sell from Neutral following recent share-price strength

Adding to what has already been annus mirabilis for Pilbara Minerals (ASX: PLS) with the share price up 132% in 12 months, the S&P/ASX50 lithium giant has snagged a 10-year debt facility through the Export Finance Australia (EFA) and Northern Australia Infrastructure Facility (NAIF) agencies.

News that both government agencies have agreed to chip in finance of $125m respectively, to help expand the miner’s Pilgangoora operation in the Pilbara region of WA, saw the share price up 2.44% in early afternoon trading.

Pilgan Plant expansion

The senior secured facility of up to $250m has been earmarked for the build and expand the Pilgan Plant to handle an additional 100,000 tonnes per annum of spodumene concentrate production at an estimated capital cost of $103m.

Funds will also be used to construct the 5m tonnes per annum crushing and ore sorting facility.

This will replace the existing contracted crushing facility and will assist future expansions which could deliver up to 1Mtpa of spodumene concentrate capacity across the entire Pilgangoora Operation at a capital cost of $194m.

Pilbara Minerals CEO Dale Henderson said the continued government support accelerates the company’s plans of becoming a fully integrated, sustainable battery materials supplier.

What happened at the full year

For the year ending 30 June 2022, the company reported a 577% increase in revenue to $1.2Bn (FY2021: $175.8m), with an average selling price of US$2,605/dmt.

The company reported a statutory net profit after tax of $561.8m (FY2021: statutory loss of $51.4m) after recognising a tax expense of $163.2m.

What brokers think

Consensus on the stock is now Hold.

Based on Morningstar’s fair value of $6.63 the stock appears to be undervalued.

Based on the five brokers that cover the Pilbara Mins (as reported on by FN Arena) the stock is currently trading with -15.4 downside the target price of $4.61.

With the highest target price ($7.70), Macquarie remains positive on the lithium market outlook, despite near-term headwinds from economic slowdowns and covid lockdowns in China. 

Pilbara Mins remains the broker’s preferred picks in the Australian-based lithium market and retains an Outperform rating.

Ord Minnett has upgraded the company to Hold from Lighten after upgraded spodumene forecasts to US$6,500/t for 2023 and US$5,700/t for 2024, increases of 44% and 66%, respectively. 

The broker’s target rises to $5.10 from $4.20.

While Citi forecasts a sharp rise in spodumene prices of 40% and 60% across FY23 and FY24, last month the broker downgraded the company to Sell from Neutral following recent share-price strength.

The broker’s target price rises to $4.60 from $3.60.

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Pilbara Minerals' share price has been on a tear this year.

 

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