Pilbara Minerals (ASX:PLS) share price jumps 8% on POSCO joint venture news

It has been a very good day for the PIlbara Minerals share price…

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The Pilbara Minerals Ltd (ASX: PLS) share price has returned from its trading halt and is zooming higher.

At the time of writing, the lithium miner’s shares are up 8% to $2.26.

This latest gain means the Pilbara Minerals share price is now up 160% since the start of the year.

Why is the Pilbara Minerals share price zooming higher?

Investors have been fighting to buy Pilbara Minerals shares this morning after the release of a major announcement.

According to the release, the company has executed a shareholders agreement with Korean giant POSCO for the formation of an incorporated joint venture.

This joint venture, named POSCO-Pilbara Minerals Lithium Solution, will develop and operate a 43ktpa lithium hydroxide monohydrate (LHM) conversion facility in South Korea. Pilbara Minerals will initially hold an 18% stake in the joint venture, but has opportunities to increase this to 30% in the future.

Management notes that the joint venture is consistent with Pilbara Minerals’ long-term strategy to become a fully integrated lithium raw materials company with a globally diversified customer base.

Conversion Facility

The release explains that the conversion facility will consist of two production trains, each with a 21.5ktpa LHM production capacity. It will leverage POSCO’s leading patented purification technology, which will be licensed on a nonexclusive basis to the joint venture.

Pilbara Minerals will supply 315ktpa of chemical grade spodumene concentrate on commercial terms to the conversion facility. This will be sourced from the company’s existing installed production capacity at the Pilgangoora Project. Product sold under the offtake agreement will be at prevailing market prices for chemical grade spodumene concentrate sold on a CIF basis.

Management stressed that this will not impact the company’s ability to continue to supply product under its existing offtake arrangements with other customers.

The costs

Based on studies undertaken by POSCO, the capital development costs for the conversion facility are currently estimated at a pre-feasibility study level to be between US$600 million to US$650 million dollars.

Though, after allowing for initial working capital and pre-production financing costs, the total joint venture funding requirement is expected to be approximately US$700 to US$750 million. Operating costs of the facility are expected to be largely consistent with industry peers.

Pilbara Minerals’ initial 18% equity participation will be largely funded through the previously announced A$79.6 million five-year convertible bond agreement being provided by POSCO. Funds will be drawn down following the formation of the joint venture and the completion of other conditions precedent.

Pilbara Minerals’ Managing Director and CEO, Ken Brinsden, said: “We are delighted to have executed the Shareholders Agreement with POSCO to jointly own and develop a 43ktpa chemical conversion facility in South Korea which will form an important part of POSCO’s overall supply chain for the lithium raw materials market in South Korea and abroad.”

“This agreement further cements our long-standing relationship with a world-class strategic partner, in the rapidly growing South Korean lithium raw materials market. This joint venture will give Pilbara Minerals significant exposure to one of the world’s most dynamic and fastest growing markets for lithium chemicals. Production is expected to commence from the second half of 2023, which should coincide with burgeoning global lithium chemicals demand.”

“We are very pleased to have the opportunity to partner with a company like POSCO and the supply of spodumene concentrate to the JV chemical plant will also have the benefit of further diversifying our global sales arrangements over time,” he added.

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