Pilbara Minerals share price higher on lithium conversion facility update

This lithium share is rising today…

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A man wearing a suit holds his arms aloft with a smile on his face is attached to a large lithium battery with green charging symbols on it.

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Key points

  • Pilbara Minerals' joint venture with Posco is going ahead as planned
  • The joint venture company will construct a downstream lithium chemicals conversion facility in Korea
  • Pilbara Minerals will initially own an 18% stake in the joint venture

The Pilbara Minerals Ltd (ASX: PLS) share price has started the week in a positive fashion.

In early trade, the lithium giant's shares are up 2.5% to $3.28.

Why is the Pilbara Minerals share price pushing higher?

Investors have been bidding the Pilbara Minerals share price higher today following an update on the company's downstream lithium chemicals conversion facility joint venture (JV) with Korea's Posco.

According to the release, the key conditions precedent and other completion criteria for the formation of the JV between Posco and Pilbara Minerals are now satisfied. These included the provision of an acceptable construction and ramp up budget for the conversion facility and the filing of necessary regulatory approvals.

In respect to the budget, the capital development costs for the conversion facility are estimated at USD$670 million to US$720 million (excluding any contingency allowance). Though, after allowing for initial working capital and pre-production financing costs, the total funding requirement for the JV is now expected to be approximately US$750 million to US$800 million. This is US$50 million greater than previous estimates.

Pilbara Minerals will fund its initial 18% stake in the JV through its A$79.6 million five-year convertible bond being provided by Posco. Funds will be drawn down under the convertible bond upon formation of the JV and completion of other closing conditions, which are expected to be satisfied later this month.

What next?

Major construction works for the South Korea-based conversion facility are expected to commence from the June 2022 quarter, with detailed engineering and early works already underway. Construction of the first train of the conversion facility is expected to be completed by mid-2023, with the second train to be completed approximately three months later.

Once complete, the conversion facility is expected to play integral role in Posco's supply chain and business strategy as it becomes a major battery materials supplier to global markets.

Pilbara Minerals' Managing Director and CEO, Ken Brinsden, said: "Pilbara Mineral's longstanding relationship with POSCO continues to go from strength-to-strength, and we are pleased to partner with them to grow lithium chemicals production to support the massive demand growth that is building around the globe."

"With commissioning expected late 2023, this joint venture places both Pilbara Minerals and POSCO in a very strong position to participate as one of the few near-term lithium fine chemicals producers with underwritten raw materials supply that will emerge in the coming two years. It's exciting for both the team at Pilbara and our shareholders to be able to extend our reach in the industry beyond spodumene and merchant markets."

Motley Fool contributor James Mickleboro 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 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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