Pilbara Minerals Ltd (ASX: PLS) shares are sliding today.
Shares in the S&P/ASX 200 Index (ASX: XJO) lithium miner closed yesterday trading for $1.43. At the time of writing, shares are changing hands for $1.40 apiece, down 2.0%.
This sees Pilbara Minerals shares down a painful 59% since this time last year. Like every other miner in the sector, Pilbara has been struggling amid a medium-term oversupply of lithium that's sent the price of the battery-critical metal tumbling.
But if the analysts at Macquarie Group Ltd (ASX: MQG) have it right, patient shareholders should be amply rewarded for holding onto the ASX 200 lithium miner at current levels. And new investors should do well buying stock today.
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Why Macquarie is bullish on Pilbara Minerals shares
On Wednesday, the miner announced a material mineral resource upgrade at its Pilgangoora project, located in Western Australia. Pilbara Minerals shares closed up 5.6% on the news.
In a report released today, Macquarie said that Pilbara Minerals "announced a 39 million tonne increase (+10%) in its Pilgangoora mineral resource and a 12% increase in grade to 1.28% Li2O".
This resulted in a 23% increase in its total contained lithium.
Macquarie noted:
The changes incorporate results of the FY24/25 drilling campaign, including the addition of new high grade areas within the Central zone of the orebody. This was offset by the exclusion of 53 million tonnes of lower-grade areas due to economic reasons.
And the broker expects that Pilbara Minerals shares could get support with further resource upside remaining.
According to the report:
PLS has highlighted material exploration potential given mineralisation remains open along ~2km of strike including at the "Bridge Zone" between the Central Area and North Area, which are un-tested below 200m depth.
The miner has moderated its exploration program against weak lithium prices and plans to resume and test this area once market conditions improve.
Connecting the dots, Macquarie said the upgraded mineral resource didn't impact its near-term earnings forecast.
The broker maintained its outperform rating on Pilbara Minerals shares with a $2.40 12-month price target. That represents a potential upside of 71.4% from current levels.
A word from Pilbara's CEO
"The significant uplift in the mineral resource reaffirms our 100% owned Pilgangoora Operation as one of the world's largest and highest-quality hard rock lithium assets," CEO Dale Henderson said of the upgrade that helped lift Pilbara Minerals shares yesterday.
"This outcome is aligned with our strategy to optimise the operating base and unlock the full potential of this world-class asset, driving long-term value for our shareholders," he added.
