Commodity markets can turn quickly.
Twelve months ago, lithium was firmly out of favour. Prices had been falling, sentiment toward lithium miners was weak, and many analysts were warning that supply could outpace demand in the medium term.
That backdrop weighed heavily on shares of PLS Group Ltd (ASX: PLS). Around this time last year, investors could buy the lithium miner's shares for about $1.89 each.
But the story didn't end there.
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Lithium sentiment turned around
Over the past year, lithium prices have rebounded strongly as expectations around electric vehicle demand, battery storage, and energy transition projects improved.
That shift in commodity prices has had a major impact on lithium producers.
Higher realised lithium prices flow directly into revenue and margins for producers such as PLS. In its latest results, the company reported an average realised price of US$965 per tonne, which was 40% higher than the prior corresponding period.
The improvement in pricing, combined with solid production and operational discipline, helped drive a sharp turnaround in earnings.
Revenue for the half rose 47% to $624 million, while underlying EBITDA jumped 241% to $253 million, with margins expanding significantly.
Those kinds of improvements tend to get the market's attention.
Scale and low costs matter
Other reasons the market has warmed to PLS shares again are its scale, asset quality, and low costs.
The company owns the Pilgangoora operation in Western Australia, which is the world's largest independent hard-rock lithium project. Large, low-cost assets like this can remain profitable even during weaker commodity cycles.
Operationally, PLS also lifted production during the period. The company produced 432.8 thousand tonnes of spodumene concentrate in the first half, up about 6% on the prior period.
At the same time, unit operating costs declined thanks to improved efficiencies and higher sales volumes.
In other words, the business was performing better just as lithium prices were recovering. That combination helped drive renewed confidence among investors.
So, would 1,000 PLS shares have made money?
Now for the answer.
If I had bought 1,000 PLS shares at $1.89 a year ago, the initial investment would have been $1,890.
Today, with PLS shares trading at $4.74, those same 1,000 shares would be worth $4,740.
That's a gain of $2,850, or roughly 151% over the past year.
Foolish takeaway
Lithium shares can be incredibly volatile. When sentiment turns negative, prices can fall sharply. But the reverse is also true.
Over the past year, improving lithium prices, strong operational execution, and renewed optimism around battery demand have helped PLS shares rebound strongly.
For investors who bought when lithium was deeply out of favour, the rewards have been significant.
