Production downgrade weighs on Pilbara Minerals, lithium outlook remains bullish
Pilbara Minerals swings 8% in the first hour of trade as investors weigh up the first-half result
Mentioned
KEY POINTS
- Pilbara Minerals shares swing almost 10% in the first hour of trade
- This is the second production downgrade since the company's FY21 results last August
- Pilbara Minerals expects a materially higher lithium price in the second-half
Buyers are stepping up after Pilbara Minerals (ASX: PLS) fell -6.5% in early trade after a mixed half-year result and CEO plans to step down by the end of 2022.
Pilbara shares have bounced sharply, currently up 2.7% at 11:00 am AEDT.
Half-year FY22 results at a glance
Revenue of $291.7m, up 394%
Net profit of $114m versus -$21.2m loss a year ago
Net cash of $14.8m versus $46.6m debt a year ago
Average spodumene selling price of US$1,250
Unit operating costs of US$347 (excl shipping)
The profit guide came in below Bell Potter and Citi expectations of $137m.
“Our financial performance for the period is a direct reflection of the incredible turnaround which has been experienced in the lithium raw materials supply chain over the past year or so,” said Managing Director Ken Brinsden.
Production downgrade
Pilbara Minerals produced 169,235 dry metric tonnes (dmt) of spodumene in the first-half.
The company expects to produce 340,000 to 380,000 dmt for the full-year FY22, down last year's guidances including:
August: 460-510,000 dmt
December: 400-450,000 dmt
The amount of shipped spodumene could vary, depending on actual production results as well as port and vessel availability.
Cost volatility
Unit operating costs excluding freight to China was US$347/dmt.
Pilbara Minerals was hit from all angles including increased royalty costs as a result of higher lithium prices, elevated sea-freight expenses, lower spodumene production rates due to plant down-time events and labour shortages.
Pilbara Minerals expects a slight uptick in unit costs in the second-half, between US$325-US$355/dmt compared to its previous guidance of US$320-US$355/dmt.
Near-term growth projects
Pilbara Minerals’ flagship Pilgan plant currently has a nameplate capacity of circa 330,000 tonnes per annum (tpa).
Ongoing plant improvements are expected to lift production capacity by 10-15% to 360-380,000 tpa.
The neighboring Ngungaju plant, which was acquired from Altura Mining (ASX: AJM) in October 2020 is coming out of care and maintenance.
The plant is targeting 180-200 tpa in the September quarter 2022.
Lithium outlook
Pilbara Minerals said that lithium chemicals price momentum is "still very strong, implying materially higher pricing in the second-half of FY22."
