Why Pilbara Minerals (ASX:PLS) shares shot up 20% in 2021

Summary

  • Shares of Pilbara Minerals Ltd (ASX:PLS) have already surged almost 20 per cent in 2021.
  • The miner posted a record shipment of 70,609 dry metric tonnes of spodumene concentrate to offtake partners in December quarter 2020.
  • The company has managed to keep the product cost low despite the plants operating at lower utilisation levels.

Beginning the new year on a strong note, shares of Pilbara Minerals Ltd (ASX:PLS) have already surged nearly 20 per cent in 2021. The stock of the miner is up almost 247 per cent since October 2020. On Tuesday, 12 January 2021, the stock closed at A$1.04, down 0.070 points, or 6.31 per cent, against the previous closing on Monday, 11 January 2021.

Image Source: Shutterstock

What is driving the rally?

The recent recovery in lithium prices is keeping the lithium shares listed on ASX on an upward trajectory. The rise is similar to one seen in BHP Group Ltd, Rio Tinto Limited, among others, on recovery in iron ore prices. The miner posted a record shipment of 70,609 dry metric tonnes of spodumene concentrate to offtake partners in December quarter 2020 on recovery in demand. The record figures represent a 38 per cent rise on the shipments for the previous quarter and are well above the last shipment record of 46,682 dmt for spodumene concentrate in December quarter 2018.

Image Source: © Kalkine Group 2021

Improvement in demand implies a rise in lithium prices. In the 2019 annual report, the company sales had a selling price of US$674/dmt. The prices had fallen between US$410 and US$423/dmt by July 2020.

READ MORE: Lithium Market Rebounds, Pilbara Minerals (ASX:PLS) at 52-week High, What’s Next?

Capital raising

The miner launched a US$240 million equity raising to complete the acquisition of Altura Mining Ltd on 14 December 2020. The company has managed to keep the product cost low despite the plants operating at lower utilisation levels. The unit cash operating expenses for the company stood at US$355/dmt in its September 2020 quarterly update.

Management commentary

Pilbara Minerals managing director and CEO Ken Brinsden had earlier said that Pilbara Minerals was responding well to the rebound in the lithium market and also to capitalise on the improvement in market scenario. The rebound would be based on the work the company has undertaken over the past 18 months in improving lithium recoveries, cutting down the operating costs, and refinancing the senior debt facility, together with the impending acquisition of the neighbouring Altura Lithium Project.

READ MORE: Pilbara Minerals (ASX:PLS) sets new quarterly shipment record

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