In less than two years, the number of lithium mines in Australia have increased from 1 to 7 to cater the increasing demand of lithium from the manufacturers of modern lithium-ion batteries. Amidst the scenario, Pilbara Minerals Ltd (ASX: PLS) started exporting lithium-rich spodumene concentrate from its Pilgangoora mine in Western Australia in October, and made an announcement on 12 November 2018 regarding the board’s approval for Pilgangoora stage 2 expansion with production capacity set to grow beyond 800ktpa of high quality spodumene concentrate.
For the expansion of the Pilgangoora project, the company will need to require necessary regulatory approvals and it will further need to secure the balance of project funding. As per the Definitive Feasibility Study the Stage 2, 5Mtpa expansion of Pilgangoora project will result in 150% increase in production. The capital estimate for the stage 2 is A$231M and it is having Post-tax NPV of A$2.160B. Pilgangoora is a hard rock lithium resource producer which is positioning itself to be in the top 3 lithium raw material producers globally by 2020. The expansion of Pilgangoora will increase the mine's output from 330k tonnes of spodumene concentrate per year to more than 800k tonnes per year by 2021.
The company is accessing various funding alternatives for its project expansion, including debt and/or offtake prepayment funding from customers linked to accessing Stage 2 product as well as other alternate finance structures. Pilbara’s CEO Mr. Ken Brinsden said he hoped to finalize funding for the expansion, which will make Pilgangoora Australia's second-largest lithium mine, before the end of the year. As per Mr. Brinsden, the company considered various financing alternatives for the expansion, from pre-payments for future lithium deliveries to debt, but the ultimate consumers of the lithium are going to be the providers of that finance.
According to Mr. Brinsden, due to the small and opaque nature of the lithium market, the main stream banks are not playing bigger role in the expansion of this sector. Due to this, the Australian lithium mines have subsequently relied heavily on equity, customer pre-payments and high-cost bonds. By pointing to a $US15 million working capital facility which Pilbara got from BNP Paribas in August, Mr. Brinsden informed that the banks are slowly coming in for the investment however they need more experience with the industry before they are completely ready to back it.
In the September quarter report, the company reported about the outstanding progress with ramp-up of the Stage 1 concentrator, which has already demonstrated 270tph process run-rates (or higher), representing 100% of the plant’s design throughput capacity. The company also informed about the US$15 million working capital and foreign exchange hedging facilities secured with globally recognized bank, BNP Paribas, supporting the Pilgangoora Stage 1 ramp-up and continued growth.
In the last six months, the share price of the company decreased by 6.04 percent as on 12 November 2018. PLS shares traded at $0.835 (-2.4% Intraday) with a market capitalization of circa $1.49 billion as on 13 November 2018.
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