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Pilbara Minerals (ASX:PLS) share price edges higher on operational update

Cut outs of cogs and machinery with chemical symbol for lithium
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Pilbara Minerals Ltd (ASX: PLS) provided an operational update to the market today for the September 2020 quarter. The news sent the Pilbara Minerals share price to an intra-day high of 38.5 cents. This was followed by a slight pullback to 37.75 cents by the market’s close, representing a 0.67% gain.

This compares to the All Ordinaires Index (ASX: XAO) which hasn’t moved much today, up 0.12% to 6,338 points.

Business update

Pilbara Minerals announced its progress on its Pilgangoora Lithium-Tantalum project, continuing mining and processing operations. The company said while production strategy was achieved, several improvements over the September quarter were made.

Pilbara Minerals saw an increase of plant run-time and utilisation. This roughly represented between 70% to 75% utilisation, compared with 40% achieved in the June quarter.

The higher plant utilisation and high product recovery contributed to a lower average unit cash operating cost of US$355 per dry metric tonnes (dmt).

Production increased with a total of 62,404/dmt of spodumene concentrate, compared to 34,484 in the prior period. This led to an increase of sales, with shipments exporting 43,630/dmt, in line with the previous June guidance.

The company said that, despite the improvement of sales volumes, the price of lithium remains weak in the current climate. This reflects the lower pricing and demand being experienced across the entire supply chain.

However, Pilbara Minerals acknowledged it’s made strong progress and can quickly take advantage of a turnaround in the lithium market. The miner expects the production surplus to flow into contracted customer sales for the new quarter.

Pilbara Minerals will further update the market with its sales guidance for the September quarter in late October.

What did management say?

Pilbara Minerals’ Managing Director and CEO, Ken Brinsden, credited the hard work of his team and business partners at Pilgangoora. Mr Brinsden went on to talk about the strategic direction of the company. He said:

We are very pleased to see continued improvement in important key metrics like plant utilisation and run-time and sustained product recoveries, which collectively translated into a continued downward trend in unit operating costs towards our long-term targeted level of US$320 – 350/dmt.

Pilgangoora is a Tier-1, long-life asset that is ideally placed to capitalise on the turnaround in the lithium market. While we fully expect that turnaround to eventuate in the not too distant future, we are still seeing soft market conditions persist across the entire lithium-ion supply chain.

Commenting on the future, Mr Brinsden said the recent refinancing will give the company confidence to weather current market conditions. Pilbara Minerals looks to ramp-up production and shipments as demand and prices recover.

Should you invest?

While I think that Pilbara Minerals is making significant progress within its operations, personally, I’d be inclined to hold off for now. The lithium market isn’t expected to make a full recovery until the mid 2020’s.

As such, I will be looking for other opportunities in the market that present a safer investment.

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Returns As of 6th October 2020

Motley Fool contributor Aaron Teboneras 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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Aaron Teboneras