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.

Bernd Struben

Author bio Bernd Struben earned his BA in economics from the University of Michigan in 1991, with post-graduate studies in environmental economics at the University of Connecticut. Over the years he’s written about and analysed the tourism industry in the Caribbean; Europe’s commercial real estate markets; and, since moving to Australia in 2010, global and Aussie share markets. Bernd studies geopolitical and macroeconomic trends, alongside sector and company specific data, to gauge what he believes could be tomorrow's best investments. In his free time, you might find Bernd at the beach with his family or working on his next science fiction novel. Areas of expertise Australian and global share markets Macroeconomic and geopolitical trends Real estate Education Economics, University of Michigan Favorite investment quote "The four most dangerous words in investing are: 'This time it's different." — Sir John Templeton

Published August 11, 2020 5:42 pm AEST

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.

colourful chalk drawing on blackboard of increasing asx share price bar graph — Image source: Getty Images

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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