The Pilbara Minerals Ltd (ASX: PLS) share price is rising on Wednesday morning.
At the time of writing, the lithium miner's shares are up almost 3% to $2.93.
This follows the release of the company's first quarter update before the market open.
Pilbara Minerals share price rises on quarterly update
For the three months ended 30 September, Pilbara Minerals reported a 3% quarter on quarter decline in spodumene production to 220.1kt. Management advised that this was anticipated and reflected the reduced plant availability resulting from the integration and ramp up of the P680 crushing and ore sorting facility.
Things were even softer for sales volumes, which reduced 9% quarter on quarter to 214.5kt for the three months. And completing the trifecta of declines was its average realised price which dropped 19% to US$682 per tonne.
This ultimately led to Pilbara Minerals recording revenue of $210 million for the three months. This represents a sizeable 31% reduction on the previous quarter.
Costs rise
Unfortunately, it seems that every metric was heading in the wrong direction during the quarter.
Pilbara Minerals' unit operating costs increased 3% to A$606 per tonne or 4% to US$406 per tonne. Management notes that this reflects lower sales volume against lower total production costs and continued focus on cost reductions.
This left the company with a cash balance of $1.4 billion, down from $1.6 billion three months earlier.
How does this compare to expectations?
The market was expecting production of 188kt for the quarter and Goldman Sachs was forecasting 208kt. It has beaten both estimates. It has also beaten the consensus estimate for costs of A$699 per tonne.
However, offsetting some of this has been its average realised spodumene price. The consensus estimate was for a price of US$801 per tonne for the quarter.
Midstream plans put on ice
In light of the current market conditions, Pilbara Minerals and Calix Ltd (ASX: CXL) have announced plans to put the Mid-Stream Demonstration Plant Project on hold.
The project remains on budget and is 60% complete. However, the project will be paused until market conditions are supportive or further government support for project continuation can be secured.
In addition, Pilbara Minerals revealed that it is intending to optimise the Pilgangoora Operation to a single processing plant via the Pilgan plant. The Pilgan plant, following the ramp up of the P1000 Project, is expected to have a standalone production capacity of ~850kt per annum (P850).
Production at the higher cost, lower capacity Ngungaju plant will be placed into temporary care and maintenance from 1 December.
Guidance downgraded
Pilbara Minerals has downgraded its production guidance for FY 2025 to reflect the P850 operating model.
It now expects production of 700kt to 740kt, which is down from 800kt to 840kt. However, its cost guidance has been reduced to A$620 to A$640 per tonne from A$650 to A$700 per tonne. Management said:
Guidance for FY25 is broadly in line with FY24 production volume despite placing the Ngungaju plant into C&M. It also shows lower unit costs relative to FY24 for approximately the same volume. This reflects the increased production volume capacity and operating efficiency at the Pilgan plant resulting from the P680 and P1000 expansion projects. All current offtake commitments can be met under this production profile.
It seems that the market likes management's plan for lower production and costs in the current environment and is bidding the Pilbara Minerals share price higher today.
