The Pilbara Minerals Ltd (ASX: PLS) share price is falling on Monday morning.
At the time of writing, the lithium miner's shares are down 3% to $3.63.
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Why is the Pilbara Minerals share price falling?
Investors have been selling the company's shares after the release of an announcement was offset by news of a broker downgrade this morning.
In respect to the former, according to the release, Pilbara Minerals has executed an amendment to its existing offtake agreement with China's Ganfeng Lithium, which materially increases short and medium term supply of spodumene concentrate to one of the world's leading lithium chemical converters.
The previous agreement was for 160,000 tonnes per annum. Whereas the new agreement almost doubles its supply to up to 310,000 tonnes per annum of spodumene concentrate over a period of three calendar years.
Management advised that consistent with the existing pricing in the agreement, all spodumene concentrate volumes will be sold based on the prevailing market price.
It also notes that this increased supply to Ganfeng is separate to the company's strategic partnership process which continues to be progressed in parallel. That process remains on track and is targeting conclusion in the current quarter.
Management commentary
Pilbara Minerals' Managing Director and CEO, Dale Henderson, was very pleased with the news. He said:
We are delighted to be expanding our valued relationship with Ganfeng, who is one of the world's leading lithium-ion supply chain participants for lithium production. Ganfeng has extensive capability in the production of battery grade lithium products with over 20 years of industry experience and a rapidly expanding global footprint as a major global supplier.
This increased supply with Ganfeng builds-on our established partnership as we work together to further extend our position in the growing market for lithium products. This increase demonstrates the demand for Pilbara Minerals' spodumene concentrate while preserving optionality for the Company as we assess long-term downstream opportunities in-line with our growth strategy.
Henderson also highlights that despite short term price weakness, the future looks bright for lithium. He adds:
The long-term outlook for the industry remains incredibly exciting. Both Ganfeng and Pilbara Minerals remain focused on extending our respective positions as major, low-cost producers in the burgeoning lithium market. We look forward to further collaboration with Ganfeng and many more successful years working together.
