The Pilbara Minerals (ASX:PLS) share price surges on resource upgrade

The Pilbara Minerals Ltd (ASX: PLS) share price jumped after it posted a 54% increase in total 2P (Proved and…

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The Pilbara Minerals Ltd (ASX: PLS) share price jumped after it posted a 54% increase in total 2P (Proved and Probable) ore reserves.

The Pilbara Minerals share price rallied over 3% to $1.94 in early trade when the S&P/ASX 200 Index (Index:^AXJO) is struggling around breakeven.

The miner is also outperforming other ASX lithium shares. The Orocobre Limited (ASX: ORE) share price fell 1.8% to $8.12 and the IGO Ltd (ASX: IGO) share price lost 0.9% to $8.51 at the time of writing.

Resource upgrades powers Pilbara Minerals share price

The discovery of new pegmatite domains, together with integration of the Ngungaju Resource led to the upgrade. Management reported a mineral resource estimate at 30 June 2021 of 308.9 million tonnes (Mt) grading 1.14% Li2O (as spodumene), 105 ppm Ta2O5 and 0.59% Fe2O3 at a cut-off grade of 0.2% Li2O.

Pilbara Minerals share price is also reacting to the upgraded Pilgangoora Lithium-Tantalum Project. Management said increased the contained lithium oxide estimates at the project by 47% to 162 Mt grading 1.2% Li2O, 100 ppm Ta2O5 and 1.0% Fe2O3.

The Pilgangoora project has a mine life of around 26 years. This is based the combined 6.3Mt per annum (Mtpa) operations, consisting of the 1.3 Mtpa Ngungaju process plant and the proposed Pilgan 5 Mtpa expanded process plant.

More growth levers ahead

“The continued growth in Ore Reserves reflected the successful integration of the Ngungaju project area and the highly successful development drilling program undertaken this year,” said Pilbara Minerals’ chief executive Ken Brinsden.

“The quality and scale of the Pilgangoora project confirms Pilbara Minerals as a leading hard rock lithium producer and truly sets the scene for our expansion to 6.3 Mtpa and continued growth beyond that.”

The updated Ore Reserve is based on a pit shell selected at a flat forward commodity price of US$588 per tonne of spodumene concentrate for Central, East and South pits.

The long-term price projection for smaller pits (comprising 6% of Ore Reserve) scheduled for later in the mine life is US$700 per tonne.

Bullish lithium outlook drives Pilbara Minerals share price

ASX lithium shares have strongly outperformed on expectations that global supply cannot keep up with demand.

The rapid adoption of electric vehicles and battery storage is driving this demand. Meanwhile, supply has been slow to play catch up.

Some experts believe this trend will persist over the medium-term. This bullish outlook sent the Pilbara Minerals share price surging over 500% over the past year. The Orocobre share price has tripled in value while the IGO share price gained 105% over the period.

In contrast, the ASX 200 is “only” up 22% over the past year.

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Motley Fool contributor Brendon Lau owns shares of Independence Group NL and Orocobre Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. 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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