The Motley Fool

Why the Pilbara Minerals share price crashed 10% lower today

One of the worst performers on the All Ordinaries index on Monday has been the Pilbara Minerals Ltd (ASX: PLS) share price.

In morning trade the lithium miner’s shares have crashed almost 11% lower to 63 cents after providing an update on production and sales at its Pilgangoora Lithium-Tantalum Project in Western Australia.

What was in the update?

According to the release, the company’s focus on optimising production at Pilgangoora has continued, with record production of 22,375 dry metric tonnes (dmt) of spodumene concentrate achieved during May.

The release explains that plant throughput and utilisation have been in line with expectations, resulting in consistent production growth month-on-month year to date.

Product recovery rates have been largely in line with previous results and the company remains on target to achieve design lithia recovery (of ~75%) by the end of the calendar year following the completion of plant improvement works and progress with optimisations.

However, the month on month production growth trend may not last. Management expects spodumene concentrate production in the range of ~20-24kt in June. This is due to a nominal 6-day planned shut-down of the concentrator.

The company intends to utilise this plant shut down to continue to rectify prior works performed by the EPC contractor, while also continuing further plant improvement works.

Then in July Pilbara Minerals’ production looks likely to be impacted significantly by a further planned shut-down of the concentrator in the second half of the month. The concentrator is due to be shut down for two weeks to facilitate ongoing plant improvement works and RCR defect rectification.

It will also support the drawn-down of existing product stocks to meet ongoing sales requirements and help manage cash flows and working capital whilst the additional conversion capacity of Ganfeng, General Lithium, and other industry participants come online.

Sales update.

Whilst the production news is disappointing, it is likely to be the company’s sales update that has sent most investors to the exits today.

Although underlying demand for battery-ready lithium chemicals remains strong, delays in the construction, commissioning and build-out of its offtake customer chemical conversion capacity in China has resulted in June quarter sales of spodumene concentrate being constrained.

These delays have resulted in lower shipped tonnes during the June quarter, which are currently estimated to be in the range of 23-45kt shipped on a dmt basis, pending the departure dates for the remaining vessels.

Furthermore, the company reported that spodumene concentrate pricing has also continued to soften and is currently in a range of approximately US$600-640/dmt CFR China.

News of weakening prices has weighed heavily on the rest of the lithium miners today. At the time of writing the Galaxy Resources Limited (ASX: GXY) share price is down 4% and the Orocobre Limited (ASX: ORE) share price has fallen 3.5%.

Due to the current weakness in lithium prices, investors might want to skip the lithium miners and look at this buy-rated cannabis company instead.

One ASX Stock For An Estimated $US22 Billion Marijuana Market

A little-known ASX company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.

And make no mistake – it is coming. To the tune of an estimated $US22 billion.

Cannabis legalisation is sweeping over North America, and full legalisation arrived in Canada in October 2018.

Here's the best part: we think there's one ASX stock that's uniquely positioned to profit immensely from this explosive new industry... taking savvy investors along for what could be one heck of a ride.

AND, this is the first time The Motley Fool Australia has EVER put a BUY recommendation on a marijuana stock.

Simply click below to learn more on how you can profit from the coming cannabis boom.

Click here to find out more

 

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.

NEW. Five Cheap and Good Stocks to Buy in 2019…

Our Motley Fool experts have just released a brand new FREE report, detailing 5 dirt cheap shares that you can buy today.

One stock is an Australian internet darling with a rock solid reputation and an exciting new business line that promises years (or even decades) of growth… while trading at an ultra-low price…

Another is a diversified conglomerate trading near a 52-week low all while offering a 2.8% fully franked yield…

Plus 3 more cheap bets that could position you to profit over the next 12 months!

See for yourself now. Simply click the link below to scoop up your FREE copy and discover all 5 shares. But you will want to hurry – this free report is available for a brief time only.

CLICK HERE FOR YOUR FREE REPORT!