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Why the Pilbara Minerals share price rocketed 13% higher today

The Pilbara Minerals Ltd (ASX: PLS) share price has returned from its trading halt and rocketed higher on Thursday morning.

At the time of writing the lithium miner’s shares are up an impressive 13.5% to 71 cents.

Why is the Pilbara Minerals share price on fire?

This morning Pilbara Minerals returned from its trading halt with the release of two major announcements.

The first was the announcement of a funding package for the stage 2 expansion of its 100%-owned Pilgangoora lithium-tantalum project in Western Australia to 5Mtpa.

The funding package is underpinned by two of the company’s key customers, Jiangxi Ganfeng Lithium Co. and Great Wall Motor Company.

The proposed financing package to fund the capital expenditure of A$231 million and related working capital will be a combination of a US$25 million pre-payment from Great Wall Motor Company, a A$50 million equity placement to Jiangxi Ganfeng, a proposed US$50 million tap issue, and existing cash from its previous equity placement with POSCO.

Management is targeting the commissioning of Stage 2 from the March quarter of 2020 and believes it puts it on a path to become one of the major global lithium raw materials producers by early next decade.

The second announcement made today involved South Korean conglomerate POSCO.

According to the release, the company has signed a non-binding memorandum of understanding with POSCO to consider a larger jointly owned chemical conversion facility to produce industry leading, high-grade hydroxide and carbonate products.

The two companies had previous agreed on a 30ktpa facility, but will now consider increasing it to 40ktpa due to strong demand from South Korean customers.

Should you invest?

Pilbara Minerals certainly has been busy over the New Year period. And while I think these are all very positive developments, the company’s future success will depend greatly on where lithium prices go over the coming years.

Following a recent update from Orocobre Limited (ASX: ORE) and weak economic data out of China, I’m not as confident on lithium prices as I once was. In light of this, I feel Pilbara, Orocobre, and Galaxy Resources Limited (ASX: GXY) shares are all holds at the moment until prices pick up again.

Motley Fool contributor James Mickleboro owns shares of Galaxy Resources Limited. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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