Pilbara Minerals Limited (ASX: PLS)
Pilbara Minerals Limited (ASX: PLS) and Calix Limited (ASX: CXL) have announced a pause in the construction of their Mid-Stream Demonstration Plant Project due to current market conditions. Although the project is 60% complete as of September 2024 and remains on budget, the companies will stop construction for any works not already under contract. The project will resume when market conditions improve or when additional government support is secured. Both companies continue to work with government bodies to explore further funding options, aiming to commercialize their innovative lithium processing technology. Despite the suspension, the project is poised to quickly restart and aim at commissioning when the circumstances are favorable.
In the September 2024 quarter, Pilbara Minerals produced 220.1 thousand tonnes of spodumene concentrate, which was slightly lower than the previous quarter. This decrease was expected due to lower plant availability, as the company integrated a new P680 crushing and ore sorting facility. Revenue declined 31% year-over-year to $210 million, mainly due to a 19% fall in spodumene prices. The company, however, is healthy from a financial point of view, sporting $1.4 billion in cash at the quarter's end. Pilbara has also optimized operations by temporarily placing its Ngungaju plant on care and maintenance to reduce costs, while the Pilgan plant continues to perform well.
Pilbara Minerals continues to focus on growing its operations and reducing costs. The P680 crushing and ore sorting facility has been successfully commissioned, and the ramp-up is progressing well. The P1000 expansion project at the Pilgan plant is more than 80% complete and is scheduled to start up in March 2025. Despite current market headwinds, the long-term outlook for lithium remains strong, driven by rising demand for electric vehicles and energy storage. While lithium prices are currently lower than expected, Pilbara Minerals anticipates a return to higher prices over time as the market stabilizes. The company is also in the process of acquiring Latin Resources to further strengthen its portfolio.
Perenti Limited (ASX: PRN)
In FY24, Perenti Limited (ASX: PRN) delivered impressive financial results, revenue at an all-time record of $3.34 billion, above the comparable prior year, built on very strong operational performance and successful integration of DDH1 into its Drilling Services division. The company reported underlying EBIT(A) of $314.2 million, a 19% increase from FY22, and a strong free cash flow generation of $184.5 million after capital expenditure. This allowed Perenti to reduce leverage, resume dividend payouts, and continue share buybacks, with a total dividend of 6 cents per share for FY24. Overall good financial situation of the company and diversified pool of assets was the main focus of the positive view in FY25 with revenue guidance between $3.4 billion and $3.6 billion, EBIT(A) of $325-345 million and free cash flow is expected to be more than $150 million.
Perenti's underground mining business, Barminco, also secured a $157 million contract extension with IGO Ltd at the Nova underground nickel mine, showcasing its long-term relationships with key clients. The company’s Contract Mining division is especially strong, with more than $2 billion in contract renewals and new work secured during the year. Perenti’s underground mining business is well-positioned to capitalize on the growing demand for underground mining, which is expected to become a larger share of new and expanded mines. The division's scale and track record of successful contract extensions (95% success rate) ensure the company can rely on a stable, annuity-like income stream over the long term.
The integration of DDH1 into Perenti’s Drilling Services division, including brands like Ranger Drilling and Swick Drilling, was a strategic success, positioning the business to benefit from a rebound in drilling activity. Despite market conditions affecting short-term performance, the long-term synergies from this acquisition are expected to drive value. In addition, Perenti’s focus on innovation, technology adoption, and operational improvements across its divisions continues to drive cost savings, reduce emissions, and enhance safety. With a robust pipeline of work totalling $15.9 billion and a strong presence in low-risk jurisdictions, Perenti is well-placed to continue delivering consistent earnings and returns for its shareholders in FY25 and beyond.
Source: Company’s Report
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