Why the Pilbara Minerals share price surged 40% in July

Australian lithium producer Pilbara Minerals’ share price surged 40% in July. We look at why the share price rocketed higher.

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Australian lithium producer Pilbara Minerals Ltd‘s (ASX: PLS) share price surged 40.0% in July. That compares to a 0.9% gain from the broader All Ordinaries (INDEXASX: XAO).

Like almost every other share on the ASX, Pilbara’s shares plummeted during the selloff following the rapid spread of COVID-19. From 21 February through 23 March, Pilbara’s share price plunged 55%.

Following its 23 March low, the Pilbara Minerals share price recovered rapidly and strongly, gaining 150% by the final trading day of July.

Year to date, the company’s shares are up 24% to 38 cents per share. That gives it a market capitalisation of $856.5 million. Over the last year, Pilbara has traded at a 52-week low of 14 cents, and a 52-week high of 52 cents per share.

What does Pilbara Minerals do?

Headquarter in Perth, Western Australia, Pilbara is a lithium-tantalum producer. It owns 100% of the Pilgangoora Project in Western Australia. The region is believed to contain some of the largest deposits of hard-rock lithium-tantalum in the world.

Currently in production, Pilbara Minerals is commencing the expansion of its Pilgangoora Project. This Stage 2 expansion will see a substantial increase in its processing capacity.

With lithium helping power electric vehicles and the wider transition away from carbon-based fuels, Pilbara Minerals aims to become one of the biggest producers in the world.

Why did the Pilbara Minerals share price surge 40% in July?

The Pilbara Minerals share price gained steadily throughout July without any major announcement that would have clearly drawn in new investors. Atop that, the lithium price didn’t make any major moves to warrant the 40% increase either.

It’s likely that many investors are speculating on the longer-term transition away from fossil fuels and towards more environmentally friendly energy sources like rechargeable batteries. And lithium is a key element in batteries that will drive tomorrow’s fleet of electric vehicles. It will also help fuel the growing market for home battery energy storage from solar and wind power.

Pilbara Minerals’ share price did gain 8% in a single day’s trading on 30 July, following its ASX media announcement that the company had secured a new US$110 million (AU$153 million) low-cost debt facility.

The new financing is being provided by international bank BNP Paribas and Australia’s Clean Energy Finance Corporation (CEFC). Both companies are long-term Pilbara supporters.

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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. 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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