Why lithium miner Pilbara Minerals exploded higher today

The Pilbara Minerals Ltd (ASX:PLS) share price has exploded higher this afternoon after the release of a positive announcement…

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The Pilbara Minerals Ltd (ASX: PLS) share price has certainly had an eventful day of trade.

After hitting a multi-year low of 45 cents after lunch, the lithium miner’s shares have rebounded strongly following the release of an announcement this afternoon.

Its shares reached a high of 55.7 cents, which means a whopping 24% jump from its low this afternoon.

What was announced?

Last month the company revealed that it would be cutting back production in June and July in order to responsibly manage cash flows and working capital during a time when demand for lithium was softening.

Understandably, this bleak outlook sparked a major selloff of its shares and put pressure on fellow lithium miners Galaxy Resources Limited (ASX: GXY) and Orocobre Limited (ASX: ORE).

This afternoon the company revealed that it has been very busy since the release of that announcement and has continued to engage with its customers.

This has led to the company signing a new offtake agreement with China’s Great Wall Motor Company. Deliveries are set to start in August 2019 at the rate of 20,000 dmt per annum and continue for a period of approximately six years.

In light of this, management now expects sales to be in the range of 35,000-48,000 dmt during the September 2019 quarter. And, looking ahead, the company expects its production and sales to return to full capacity by the December 2019 quarter.

Pilbara Minerals also advised that it has made strong progress in its growing relationship with South Korean conglomerate POSCO. This includes a recent meeting between executives of both companies in South Korea.

The release explains that the two parties have reached an in-principle agreement on final joint venture terms for the downstream chemical conversion plant.

The proposed joint venture’s annual capacity is 40,000t LCE (lithium carbonate equivalent), with Pilbara Minerals responsible for the spodumene concentrate supply over the life of the project.

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Motley Fool contributor James Mickleboro owns Galaxy shares. 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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