The Pilbara Minerals Ltd (ASX: PLS) share price is on fire today. Pilbara shares opened at 96 cents a share this morning, but have risen, at the time of writing to $1.04 a share, up 9.74%. That makes it one of the day's top 3 performers on the S&P/ASX 200 Index (ASX: XJO)
Pilbara is not a company known for its calm, tranquil journey on the ASX. At the current share price, Pilbara shares are up 17.8% year to date. However, they are also down 25% from the company's 52-week high of $1.37 which we saw back in mid-January. Even so, Pilbara is up a whopping 542% over the past 12 months.
So what is this company? And why is the Pilbara share price on fire today?
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A lithium miner, if you please
Pilbara Minerals is primarily a lithium and tantalum miner. Lithium is known for its applications in modern electronics, most prominently in lithium-ion batteries that are standard in most modern rechargeable electronic devices. This includes smartphones, as well as electric vehicles.
Tantalum is also a metal that is primarily used in electronics. Namely in capacitors and resistors that are a critical component of electronic circuit boards. For Pilbara, it is a valuable byproduct of its lithium extraction.
Pilbara Minerals' primary asset is its Pilgangoora Lithium-Tantalum Project in Western Australia. This project currently outputs around 2 million tonnes of ore per annum.
But Pilbara aims to expand this production to 7.5 million tonnes per annum. Lithium is a highly strategic asset due to its growing importance in the manufacturing of essential electronics.
Pilbara predicts that global demand for lithium-ion batteries will "experience unprecedented growth" over the coming decades. To try and capture some of the future value creation from this growth, Pilbara also boasts a partnership with the Korean company POSCO for a jointly developed processing facility in South Korea.
Why is the Pilbara share price on fire today?
There's no obvious reason why Pilbara shares are rising so enthusiastically today. The last major announcement from the miner was an agreement with GLX Digital to establish a new trading and sales software platform for its Pilgangoora Project.
While this was undoubtedly a welcome development for the company, it was also back on 18 March. So investors have had a lot of time to digest that bit of news.
Another development that might be assisting the Pilbara share price today is the recent ASX 200 rebalance that was executed by the index's administrators. As of Monday, Pilbara officially joined the ASX 200, the ASX's most-tracked index. Since many exchange-traded funds (ETFs) mirror this index and are mandated to hold whatever the index holds, we shouldn't be surprised to see the Pilbara share price climb in the aftermath of this rebalancing.
Finally, it's worth mentioning the inherently volatile nature of lithium companies on the ASX. Lithium miners have long had a reputation for volatility. That's due to the speculative nature of many investors that pay attention to this space.
There was an infamous 'lithium bubble' in this sector back in 2017. This was fuelled by rampant speculation that lithium prices were about to hit the stratosphere due to the coming mass-adoption of electric vehicles. This of course failed to materialise in a meaningful way, resulting in Pilbara losing 86% of its value between January 2018 and March 2020.
So the moves we see today in the Pilbara Minerals share price could just come down to a combination of all of these factors. Either way, shareholders will no doubt be pleased with the day's developments. At the current share price, Pilbara Minerals has a market capitalisation of $2.95 billion.
