Reporting Season

Production downgrade weighs on Pilbara Minerals, lithium outlook remains bullish

Wed 23 Feb 22, 11:22am (AEST)
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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."

Pilbara Minerals lithium outlook 1H22

 

Written By

Kerry Sun

Finance Writer & Social Media

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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