The Pilbara Minerals Ltd (ASX: PLS) share price is on course to finish the day with a gain.
In afternoon trade the lithium miner's shares are up 1.5% to 68.5 cents following the release of an update on its Stage 3 Scoping Study.
What did the study find?
According to the release, the Stage 3 Scoping Study demonstrates the Pilgangoora project's significant scale, long life, high-quality products and expected low-cost of operations.
Management advised that this supports its continued expansion pathway and Pilbara Minerals' downstream participation strategy.
The study found that the project has "exceptional economics". It has a post-tax NPV 10% of A$3.73 billion, life of mine (LOM) project revenue of A$16.6 billion and LOM project EBITDA of A$10.3 billion. This is based on underlying spodumene pricing developed from revised lithium chemicals' forward price forecasts provided by Roskill.
It also found that it would result in a substantial increase in processing capacity to 7.5Mtpa to deliver average annual production of approximately 1.2Mtpa of SC6.0 spodumene concentrate and approximately 1.1Mlbspa of 30% tantalite concentrate over a mine life of 15 years.
And finally, the study found that the Stage 3 expansion would have competitive LOM operating costs of approximately US$291/tonne CIF.
The company's managing director and CEO, Ken Brinsden, was delighted with the results of the study.
He said: "The Stage 3 Scoping Study has delivered exceptional results which further reinforce the Pilgangoora Project's outstanding quality and scale. The ability to expand the Project to a production rate of well over 1Mtpa of spodumene concentrate, with a minimum mine life of 15 years, underlines our position as a globally significant lithium raw materials producer. At the same time, we believe there is excellent potential to grow the mine life beyond 15 years."
Mr Brinsden was also very optimistic on the company's long term prospects thanks to the electric vehicle and battery storage booms.
He added: "The opportunity in front of us has never been more apparent. As the electric vehicle and battery storage sector grows, so does the opportunity for Pilbara Minerals to become a player in the lithium raw materials supply chain. Together these projects diversify our entrance into this growing market and play directly into our downstream value-adding strategy."
Should you invest?
Whilst I think that Pilbara Minerals has a quality asset on its hands, I feel the success of an investment in the company will ultimately come down to where lithium prices go over the next few years.
Prices have come under significant pressure over the last 12 months due to increasing supply and falling demand. This has unfortunately led to sharp declines in the shares of Pilbara Minerals and lithium peers such as Galaxy Resources Limited (ASX: GXY) and Orocobre Limited (ASX: ORE).
Unfortunately, lithium prices have continued to weaken in 2019. As a result, I would suggest investors hold off an investment in the industry until prices reach an inflection point.
Until then I would gain exposure to the resources sector through miners such as BHP Group Ltd (ASX: BHP) or Rio Tinto Limited (ASX: RIO)
