Could the Pilbara Minerals Ltd (ASX: PLS) share price be worth considering at today's value? One broker has had their say.
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What is Pilbara Minerals?
Pilbara Minerals is one of the largest lithium miners on the ASX, owning one of the largest hard-rock lithium operations. The Pilgangoora Project in Western Australia's Pilbara region produces a spodumene and tantalite concentrate.
The company says it is pursuing a growth and diversification strategy to become a sustainable, low-cost lithium producer, and fully integrated lithium raw materials and chemicals supplier in the years to come. Pilbara Minerals believes it can become a major player in the lithium supply chain.
It believes there will be increasing demand for clean energy technologies such as electric vehicles and energy storage as the world pursues a sustainable energy future.
Is the Pilbara Materials share price worth buying?
The brokers at Macquarie Group Ltd (ASX: MQG) think so, with a price target of $2.80. That implies a potential increase of the share price of more than 20% over the next 12 months, if the broker is right.
A key reason for Macquarie's optimism is the strong price that lithium is experiencing, which should help Pilbara Minerals' cash flow as it reaps the rewards of the strong lithium market.
It was on 26 October 2021 that Pilbara Minerals released the results of its third Battery Material Exchange (BMX) auction for spodumene.
A cargo of 10,000 dry metric tonnes (dmt) at a target trade of 5.5% lithia was presented for sale on the digital platform, with a deferred delivery date in February 2022.
There was strong interest in both the participation and bidding, with a broad range of buyers.
Parties placed 25 bids online during the 45-minute auction window, with the company considering the bidding to be "very strong" in light of the deferred delivery date.
Pilbara Minerals said it intends to accept the highest bid of US$2,350 per dry metric tonne, which on a pro-rata basis for lithia content (including freight costs) equates to a cost of approximately US$2,629 per dmt.
How is the lithium miner performing operationally?
The company's quarterly updates can have an impact on the Pilbara Minerals share price.
For the three months to September 2021, the business saw a "strong" operational performance, delivering record operating cash flow.
It achieved record production of 85,759 dmt of spodumene concentrate, up 11% quarter on quarter from the FY21 fourth quarter. Spodumene concentrate shipments were 91,549 dmt, exceeding guidance of 77,000 dmt to 90,000 dmt. It also sold 36,876 lbs of tantalite concentrate.
In terms of project development, Pilbara Minerals said the commissioning of the Pilgan processing plant improvement projects has commenced, with the first concentrate production achieved through the new filter press subsequent to the quarter-end.
It has also commenced commissioning of the coarse production circuit, with the first spodumene concentrate produced from the Ngungaju processing plant subsequent to the quarter-end.
Finally, earthworks have progressed for the construction of a 6MW solar farm for the Pilgangoora Project with a power purchase agreement signed with Contract Power Australia after the quarter-end.
Based on Macquarie's projection, the Pilbara Minerals share price is valued at 15x FY23's estimated earnings.
