One of the biggest movers during trade today has been the Pilbara Minerals Ltd (ASX: PLS) share price.
At one stage the lithium miner's shares climbed as much as 19% to 65 cents. At the time of writing they have given back some of their earlier gains, but still sit 16% higher at 63.5 cents.
Why have its shares rocketed higher?
As we reported earlier today, after the market closed on Thursday Pilbara Minerals announced that it had signed a binding agreement with China-based Great Wall Motor Company for Stage 2 off-take from its flagship Pilgangoora Lithium-Tantalum Project in Western Australia.
According to the release, Great Wall's Stage 2 off-take will comprise 75,000tpa of chemical grade spodumene concentrate for an initial five-year term.
The automaker has the option to extend the agreement for a further 10 years via two five-year options and secure a further 75,000tpa of Stage 2 offtake by providing Pilbara with US$50 million of debt financing for its Stage 2 expansion either via a debt or off-take pre-payment facility.
In addition to this, a subscription agreement has been executed with Great Wall for an upfront $28 million equity investment in Pilbara Minerals at 50 cents per share. The proceeds will be used towards completion of Stage 1 of the Pilgangoora Project and financing of the Stage 2 definitive feasibility study.
Should you invest?
In my opinion this is great news for Pilbara Minerals and significantly de-risks the Pilgangoora Project. As a result, I can't say I'm surprised to see its shares rocket higher today.
Demand for lithium is expected to grow exponentially over the next couple of decades as electric vehicle and renewable energy adoption acclerates.
With supply struggling to keep up with demand, prices are expected to remaining at their lofty levels, putting Pilbara Minerals and its peers in a position to profit greatly.
Whilst I think it could be a very good option for investors looking for exposure to the industry, I still have a preference for Galaxy Resources Limited (ASX: GXY).
I believe its world-class assets, the growing demand for lithium carbonate, and its low production costs make it a standout in the resources sector.
