Here’s why this top broker is tipping 20% upside for the Pilbara (ASX:PLS) share price

Macquarie reckons that Pilbara is a buy with 20% upside.

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One top broker thinks that the Pilbara Minerals Ltd (ASX: PLS) share price offers upside of around 20% over the next year.

Brokers project where they think a share price is going to be in a year from now with what’s called a price target.

Price target on the Pilbara Minerals share price

The brokers at Macquarie Group Ltd (ASX: MQG) currently rate Pilbara Minerals as a buy.

Macquarie’s price target on Pilbara is $2.80, around 20% higher than it is today.

The latest note from Macquarie referred to the announcement regarding restarting the Ngungaju Plant.

Ngungaju Plant

Near the end of November 2021, the lithium miner said that it has upsized its finance facility by US$20 million to US$130 million and increased the working capital facility by US$10 million to US$25 million. That means that total senior secured debt facilities increased by US$30 million to US$155 million.

Those additional funds will primarily be used to fund the staged restart of Ngungaju Plant, including the reimbursement of amounts already by the company.

Wet commissioning at the Ngungaju Plant, and first ore produced from the coarse production circuit, commenced on 7 October 2021, which is the first step of the re-commissioning of the operation.

First concentrate from the Ngungaju Processing Plant was delivered on 13 October 2021. The fines spodumene processing circuit is expected to commence production during the quarter for the three months to March 2022.

Management said the increased facility limit is another demonstration of the strength of the business, the quality of the asset and follows an “extraordinary year of growth and transformation”.

Strong lithium prices

Another thing that both the broker and the company itself is focused on, is the strong lithium price. In investor minds, the higher lithium price is helpful for the Pilbara Minerals share price.

On 26 October 2021, Pilbara announced the results of its third Battery Material Exchange (BMX) auction. It said that it was selling a cargo of 10,000 of dry metrics tonnes (dmt) with a target trade of 5.5% lithia, with a deferred delivery date of February 2022. There was “strong interest”, with 25 bids during the 45-minute auction window. It said it intends to accept the highest bid of US$2,350 per dry metric tonne.

Pilbara Minerals notes the continuing strong conditions in the global lithium market. Price reviews under existing off-take agreements have commenced in light of the stronger lithium prices.

Other broker ratings on the Pilbara Minerals share price

Other brokers are less optimistic about the business.

Citi is currently ‘neutral’ on the business with a price target of $2.20 – lower than where it is now.

Credit Suisse has a price target of just $2.05, with a sell rating, or ‘underperform’.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. 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 recommended Macquarie Group Limited. 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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