The Pilbara Minerals Ltd (ASX: PLS) share price has already run up by almost 25% this year and has surged 250% since October 2020. We take a closer look at what the miner has been up to.
Lithium spot price recovery
Much like booming iron ore prices sending the Fortescue Metals Group Limited (ASX: FMG), BHP Group Ltd (ASX: BHP) and Rio Tinto Limited (ASX: RIO) share prices to record highs, recovering lithium prices has initiated a broad recovery in ASX lithium shares.
On 6 January 2021, Pilbara reported a record December quarter 2020 shipment of 70,609 dry metric tonnes (dmt) on improving spodumene concentrate demand conditions. The update highlights a material uplift in lithium chemicals pricing within China, with the Platts battery grade lithium carbonate pricing assessment up 35% to date from its lows in August 2020.
Previously, in the company’s 2019 annual report, annual spodumene concentrate sales were achieving a selling price of US$674/dmt. By July 2020, prices had further weakened to US$410–423/dmt.
Pilbara pushing ahead
While a lithium price recovery is still in its early days, Pilbara has gone full steam ahead with an acquisition under the belt, focusing on cost and moving from moderated production towards full production.
Back on 14 December 2020, the company launched a $240 million equity raising to acquire Altura Mining Limited (ASX: AJM). Pilbara neighbours Altura’s operations, so the acquisition will allow the group to unlock significant exploration, logistics and infrastructure synergies.
From a cost perspective, many ASX lithium shares such as Orocobre Limited (ASX: ORE) have been producing at or below cost amidst weak lithium prices.
Pilbara has been able to maintain low production costs despite its plants running at lower utilisation levels. In its September 2020 quarterly update, the company’s unit cash operating costs stood at US$355/dmt, with unit costs trending towards its target of US$320–350/dmt.
Pilbara Minerals managing director and CEO Ken Brinsden is pleased with how the new year has turned out. Looking ahead, he commented:
The significant amount of work we have undertaken over the past 18-months in improving lithia recoveries, reducing operating costs and refinancing our senior debt facility, together with the impending acquisition of the neighbouring Altura Lithium Project, means that Pilbara Minerals is well positioned to respond to a recovery in the lithium market and capitalise on improvements in market conditions.
At the time of writing, the Pilbara share price is up 0.64% for the day at $1.10 per share.
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Motley Fool contributor Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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