Is It Prudent to Invest in Pilbara During This Correction?

Team Veye | 10-Jul-2024

Pilbara Minerals Limited’s strategy of growing production in line with the market makes it a favourite with investors.

Pilbara Minerals Limited (ASX: PLS) recently announced the findings of its pre-feasibility study (PFS), indicating the potential to expand production capacity at its wholly-owned Pilgangoora Operation to more than 2.0 million tonnes per annum (Mtpa). This expansion, named the P2000 Project, is expected to result in an average annual production of approximately 1.9 Mtpa over the first ten years, with production exceeding 2 Mtpa during the first six years post-ramp-up.

The company in its quarterly results for the period ending 31 March 2024 reported solid operational performance with a production volume of 179.0 thousand dry metric tonnes (DMT) of spodumene concentrate for the quarter. The P680 Primary Rejection Facility achieved nameplate production capacity in the latter half of the quarter.

The unit operating cost (FOB) of $675/dmt in the March quarter was lower than the $691/dmt for the half-year ended 31 December 2023, demonstrating improved unit operating cost performance during FY24. Excluding the cost of the temporary mobile ore sorting equipment, the unit operating cost (FOB) for the March quarter would have been approximately $625/DMT. The company maintained a strong cash position of $1.8 billion as of 31 March 2024.

Pilbara Minerals ASX plans to advance its production growth trajectory, with an expansion in production capacity slated for FY25 where the P1000 project is expected to deliver a 1Mtpa nameplate capacity. Furthermore, the company aims to further increase and potentially double its already robust production and revenue generation capabilities with the P2000 expansion plan.

Pilbara as one of the Top ASX Stocks is well-positioned to leverage the promising long-term fundamentals of the lithium industry, with advanced plans for production expansion. 

Significant financial improvements, such as reductions in unit operating costs, are also set to support the company’s financial and Pilbara Minerals share price growth. The PFS for the P2000 project projects an extensive NPV of $2.6 billion and an IRR of 55%, highlighting compelling economic prospects for investors. These expansion plans over the coming years indicate substantial potential for improved revenue generation and sales activity. 

Source - Company reports

Graphic source - Company reports.

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