Earnings call transcript: Pilbara Minerals Q1 2025 sees revenue drop, stock dips

Published 17/04/2025, 01:48
 Earnings call transcript: Pilbara Minerals Q1 2025 sees revenue drop, stock dips

Pilbara Minerals Ltd reported a revenue of $150 million for Q1 2025, marking a 30% decrease quarter-on-quarter. The company’s stock price experienced a slight decline of 1.82% following the earnings announcement. According to InvestingPro data, the stock has fallen over 64% in the past year, with a current market capitalization of $2.7 billion. Despite the revenue dip, Pilbara maintains a robust cash position of $1.1 billion, supported by strategic cost reduction initiatives. The company’s overall financial health score stands at "FAIR" based on InvestingPro’s comprehensive analysis.

Key Takeaways

  • Revenue decreased by 30% quarter-on-quarter.
  • Stock price fell by 1.82% post-earnings announcement.
  • Successful completion of the P1000 expansion project.
  • Lithium recovery rate targeted to improve from 67.1% to 75%.
  • Strong cash balance of $1.1 billion.

Company Performance

Pilbara Minerals, the world’s largest independent hard rock lithium producer, faced a challenging quarter with a significant revenue drop. This decline reflects broader industry trends and market volatility, with InvestingPro data showing a 65% year-over-year revenue decline and rapid cash burn through operating activities. Despite these challenges, the company remains focused on long-term growth, supported by strategic expansions and a diversified portfolio, including the POSCO joint venture in South Korea and the recent acquisition of the Kalina project in Brazil. The company maintains strong liquidity with a current ratio of 7.07, indicating robust short-term financial stability.

Financial Highlights

  • Revenue: $150 million, down 30% from the previous quarter.
  • Cash balance: $1.1 billion.
  • Operating cash margin: $39 million.
  • Unit operating costs: Increased by 10% to $685 per tonne.

Outlook & Guidance

Pilbara is deferring its P2000 feasibility study to FY27 while focusing on optimizing the P1000 project. The company aims to achieve a long-term lithium recovery rate of 75%. It is also preparing its FY26 budget with various price scenarios, indicating a cautious yet strategic approach to future growth.

Executive Commentary

CEO Dale Henderson highlighted the company’s resilience amid market volatility, stating, "While near-term volatility remains, the long-term fundamentals for lithium are compelling and continue to strengthen." CFO Luke Patolli noted the potential for upside, emphasizing that many operators are currently operating at a loss, which could benefit Pilbara’s competitive position.

Risks and Challenges

  • Market volatility affecting lithium prices.
  • Rising operating costs impacting margins.
  • Potential delays in project expansions.
  • Global economic uncertainties influencing demand.
  • Competitive pressures from other lithium producers.

Q&A

During the earnings call, analysts inquired about potential share buybacks, the deferral of the POSCO JV option, and strategies for cost reduction. The company also addressed questions on optimizing recovery rates, reflecting investor interest in operational efficiencies and future growth strategies.

Full transcript - Pilbara Minerals Ltd (PLS) Q3 2025:

Desmond, Conference Moderator: Please be advised that today’s conference is being recorded.

I would now like to hand the call over to your first speaker today, Mr. Dale Henderson, Managing Director and CEO. Thank you. Please go ahead.

Dale Henderson, Managing Director and CEO, Pilbara Lithium (PLS): Thanks, Desmond. Good morning, and thank you all for joining us today. I’d like to begin by acknowledging the traditional owners of the lands on which PLS operates. From where we are joining the call today in Perth, we acknowledge the Wodjak people of the Noongar nation. We also recognize the Nyamal and Garriyara peoples on whose land our Pilbara operations are located.

We pay our respects to their elders past and present. Joining me today is Luke Patolli, our CFO, and Brett McFadgen, our executive general manager of operations. We’re also supported by other members of the senior team. This call will run for approximately an hour. We’ll begin with the presentation on our March performance followed by q and a.

We will address questions submitted by the webcast at the end of the session. The March has been a transformational period for PLS. We delivered on several major strategic objectives. The successful implementation of the p eight fifty operating model, your intangible cash cost savings, the on plan ramp up of the p 1,000 expansion project, marking the completion of a major investment cycle, and the acquisition of the Kalina project through the Latin Resources acquisition, adding another high quality growth option to our portfolio. These achievements were were delivered while maintaining our fortress balance sheet, setting us apart in a volatile environment.

We operate in a sector known for its cyclical nature. Our strategy has always accounted for this volatility, not just to mitigate the risks, but to capture the opportunity. While lithium prices are currently at cyclical lows and geo geopolitical tensions have created uncertainty, we remain confident in the medium to long term outlook for lithium. Today, while our focus is the March results, we will also highlight some of the longer term structural foundations that underpin our resilience and our future growth. Please turn to slide two.

PLS is the world’s largest independent hard rock lithium producer. Our independence gives us the flexibility to respond with agility in a fast changing global market. Our foundation is the long life, high quality Pilgangoor operation in Western Australia. Our investments in the P680 and P1000 projects have established a leading lithium processing platform with increased capacity and expected operating cost improvements to follow, strengthening our position on the global cost curve. We continue to diversify geographically and downstream with our POSCO joint venture in South Korea and new growth options in Brazil.

We also maintained a strong balance sheet, ending the period with 1,100,000,000 in cash and undrawn facilities, providing a foundation of strength and flexibility. This balance sheet position is the product of disciplined capital management decisions over the past few years. Luke will recap on this history a little later. Turning to slide three. Our strategy is anchored by disciplined reinvestment through the cycle.

Over time, this has delivered scale and can provide meaningful reductions in unit operating costs, care of that scale, and care of the new processing capability within these expansions. With the P 1,000 expansion now built and ramped up, we are moving into the optimization phase. This marks a shift from construction to performance improvement, setting the stage for enhanced margins in FY ’twenty six and beyond. Turning to slide four. Some key highlights for the quarter include, in the operations, TRIFR reduced to 3.22, reflecting our continued focus on safety.

Production of 125,000 tonnes and sales of 125,500 tonnes were on plan after accounting for the six days of tropical cyclone Zilia, which was the cat five cyclone, which came in into close proximity near Port Hurlam. We also had the ramp up of the P1000 project successfully completed and, as I said, has now entered optimization phase. As it relates to our projects and joint ventures, completion of the Latin Resources acquisition, adding the Kalina project to the PLS stable, and the POSCO PLS joint venture, also called PPLS, progressed well with production ramp up and customer certification progressing. Lastly, as it relates to financials highlights, revenue of 150,000,000, supported by a 7% increase in the realized price to $7.47 US dollars per tonne. Operating cash margin of 39,000,000 despite ramp up headwinds and a lower part of the pricing cycle.

This, of course, led it down to a robust cash position of $1,100,000,000 And FY ’twenty five guidance, we’re reaffirming across all key metrics. Now with that, I’ll now hand over to Brett for a deeper look at our operations. Over to you.

Brett McFadgen, Executive General Manager of Operations, Pilbara Lithium (PLS): Thank you, Dale. I’ll start with safety. And the March delivered a solid safety performance at Pilgangora with a twelve month rolling average TRIFR dropping from 3.58 in the prior quarter to 3.22. We did, however, report three recordable injuries, which was disappointing, and we continue to implement safety program initiatives such as the visible felt safety leadership program. This program at work resulted in over eight hundred hours of safety related training with our leadership group, empowering our people to create a safe work environment.

The March spodumene concentrate production volume decreased to 125,000 tonnes compared to the prior quarter. Adjusted for Tropical Cycloneselia, this was on plan with the difference between the last quarter primarily due to no contribution from Nungaji plant for the full quarter under our P850 operating model, planned downtime for P1000 tie in and the impact of the ramping up activities. Total material mined was 5,600,000 wet tonnes with the reduction compared to the prior quarter in line with the P850 operating model. I’m pleased to advise good progress continued in our transition to an owner operator mining model through the March with a number of excavators and ancillary mining equipment commissioned realizing further improved operating efficiencies and cost improvements. We look forward to the addition of operational efficiencies and cost improvements this will provide over time.

Lithium recovery of 67.1% in the March was lower than the prior quarter as expected due to the impact of P1000 tie ins and ramp up. The commissioning activity can negatively impact recoveries as the plan is interrupted frequently by the very nature of commissioning with parts of the circuit undergoing flow rate and durability testing to ensure construction was to design. This is outside of the normal steady state operations pre and post P1000 integration. Despite this, recoveries did exceed external forecasts. We expect to see recoveries trend upwards in the June as commissioning activities have concluded.

Turning to Slide six. As Dale mentioned, we’ve now substantially completed a two year investment in the Pilgan plant by the P680 and P1000 expansions. P1000 was commissioned in the March with first ore achieved on the 01/31/2025 and all performance test required criteria achieved in February. Aside from the impact of cyclone Xelia, the Pilgan plant has operated to plan delivering daily targeted production volumes during periods of expected plant availability. We will continue to further optimize the plant in the June and expect to see key metrics continually to improve.

It’s not an understatement to say that these two projects have completely transformed the Pilgangora operation. We’ve added an additional 420,000 tonnes per annum of production capacity and via the ore sorting facility increased our ability to capture more lithium units from our ore body. We’ve also added new technology, gives us greater operational flexibility to react to market conditions. Most importantly, we’ve created scale and efficiencies, which will enable us to reduce unit operating costs and capture margin through the cycle. Thank you.

And I’ll now hand back to Dale.

Dale Henderson, Managing Director and CEO, Pilbara Lithium (PLS): Thanks, Fred. And just to add, the, yeah, the ramp up quarter has been a fantastic success when you when you consider what’s involved in integrating and bringing online one of these circuits and what is a a very large Brownfields expansion. And the success has actually been set up by a fantastic construction builder in the course of the year on time and and on budget, but the rubber really meets the road and ramp up when you are integrating. And to do that in a live operation and what is a material step up and volume, as Brett mentioned, it is quite a feat. And just to remind everyone, and this is pretty obvious, building in the Pilbara is not easy.

Doing hard rock processing is not easy, and it’s even harder when you are bringing to life what is probably the most complex integrated processing circuit, which has been built to date. So a hell of a feat to deliver this on plan despite the impacts of what is one of the largest, cyclones we’ve seen in the region for many, many years. So well done to the projects team. Well done to the operating team and all the team at, PLS. It’s been a great outcome, and really proud of the result.

Moving to slide seven. PLS has steadily built a portfolio of strategic growth options, each designed to provide flexibility, diversification, and value creation. As it relates to Australia and as mentioned, the P850 model is delivering cost savings as expected, and the Nugaju processing plant remains on standby, ready when market conditions are appropriate. As it relates to the midstream demonstration plant, construction has resumed, made possible care of the WA state government grant funding that we received to us and Calixir. Thank you to the Cook government for that support.

The p two thousand feasibility study, we are deferring that to FY ’27 to preserve optionality. Moving to South Korea. Our PPLS joint venture with POSCA is progressing well. Train one has certified production serving two customers so far, and that’s set to increase. And train two is advancing towards a certification, so great to see that progress.

We’ve also agreed with POSCO to defer the PLS call option on our on our equity step up from 18 to 30%, and we’re deferring this potential point into FY twenty seven. So grateful for that agreement from POSCO. I’d also add that as it relates to to South Korea, we had a a team in Korea last week to catch up, and and fantastic to hear all of the positive news around how POSCO is traveling, but more generally, the South Korean battery market as one of these emerging Western hubs. So really excited to to hear the discussions coming from those meetings last week at the Fastmarkets Conference. Moving to Brazil.

We completed the acquisition of the Kalina project, a counter cyclic all script transaction. We believe this will be highly accretive to shareholders over time. A small target drilling program and study work is underway with results June sorry, results due in June 26. And, of course, all of these initiatives are considered through our capital management framework focused on long term value creation. And, of course, intrinsic within that is making sure any investment is timed appropriately with the market.

Now with that, I’ll now hand to Luke for a review review of the financials.

Luke Patolli, CFO, Pilbara Lithium (PLS): Thanks, Al, and good morning to those on the call. Please turn to Slide nine of the presentation for a summary of the group’s key financial metrics for the quarter ended March or Q3 FY twenty twenty five. Group revenue in the March was $150,000,000 a 30% decrease on the December. This was driven by a 39% decrease in sales volume, partially offset by a 7% increase in the average realized price. The average realized price increased from US700 dollars per tonne in the December to US747 dollars per tonne in the March.

Production volume of 125,000 tonnes in the March was 34% lower than the prior quarter. As has been mentioned, lower production volume was driven by the impact of a full quarter of the Noguchi plant in care and maintenance, P1000 tonnes in ramp up and unplanned downtime caused by cyclone Zillia. Sales volume of 125,000 tonnes in the March was 39% lower than the prior quarter, driven by the lower production volume. Looking at unit costs, unit operating costs on an FOB basis increased by 10% in the March to $685 per tonne compared to the prior quarter. The potential for an increase in unit operating costs was outlined in the December quarterly and primarily reflects the impact of P1000 times and ramp up.

Pleasingly, the increase in unit costs was better than our internal plan due to continued operating efficiency improvements, including from the transition to the P850 operating model. Total operating costs in dollar terms were lower quarter on quarter. However, lower production volume offset that benefit and resulted in higher unit costs. Unit operating costs on a COF basis were also 9% higher than the prior quarter at $796 per tonne, with the higher FOB unit costs partially offset by lower royalty costs and lower shipping costs. Turning now to Slide 10.

Slide 10 shows a cash flow bridge for the March FY ’twenty five. The group’s ending cash balance as at 31 March $20.25 was $1,100,000,000 as mentioned earlier and remained strong. Cash declined by $109,000,000 in the March, primarily due to planned capital expenditure of $101,000,000 Focusing on cash margin, our cash margin from operations defined as receipts from customers, less payments for operating costs was positive and $39,000,000 in the quarter. Cash margin from operations less capitalized mine development costs and sustaining CapEx was also positive $12,000,000 in the quarter. The cash flow improvement benefits of the transition to the PH50 operating model are now being reflected in cash margin.

Turning to investing cash flows. Total spend of $101,000,000 was made on CapEx in the March. CapEx on an accruals basis was $103,000,000 and comprised growth CapEx related to the P1000 expansion project of $40,000,000 infrastructure and projects of $37,000,000 mine development costs of $21,000,000 and sustaining CapEx of $5,000,000 Turning now to Slide 11. Over the last eighteen months, the group has proactively implemented a series of cost reduction initiatives. Slide 11 summarizes those initiatives.

Notwithstanding the group has had a strong net cash position over this period and was not facing balance sheet pressure, the group made a strategic decision early in the cycle to focus on maintaining its strong balance sheet. This is a competitive advantage which PLS holds in the lithium sector. These initiatives have included pausing on dividend payments in January 24, reducing planned capital expenditure in January 24, implementing a workforce reduction in March 24, and transitioning to the PH50 operating model in December 24. In aggregate, these initiatives have delivered reductions across operating costs and capital expenditure. Lithium is a fast growing and constantly changing sector with a strong growth outlook, which Dale will speak to in the next section of the presentation.

Fast growing sectors often feature volatility. The group was an early mover on cost reduction initiatives in response to this price volatility. Today, the group remains highly committed to balance sheet preservation. It is strongly positioned to manage through the cycle given past decisions and a continued focus on prudent financial management going forward. I’ll now hand it back to Dale.

Dale Henderson, Managing Director and CEO, Pilbara Lithium (PLS): Thanks very much, Luke. So moving to the market on Slide 12. Pricing over the quarter has moved to the right with limited fluctuation for the period. Pricing for spodumene concentrate is approximately $800 to $820 per tonne on a 56 basis at this time, depending which price reference you’re referring to. I note that this level remains well under the expected long term averages long term price averages that are being projected, including those estimates that have recently been revised downwards.

As it relates to supply well, from a supply side, market share appears to be consolidating amongst the lowest cost operators with and of those, some are certainly reporting margin pressures or outright losses. Given this, it’s reasonable to assume pricing moves upwards. The big question is when. Now historically, the lithium market has tended to respond rapidly and catch the market by surprise. Time will tell if this occurs.

From the demand side, well, there are some very, very strong indicators, which I’ll now touch on in brief. Moving to slide 13. EV sales have started the year very strongly. This graph details the monthly EV sales trends for the past four years. The green columns indicate the sales this year.

EV sales for March 25 are up an estimated 29% year on year, a pretty remarkable feat the context of some of what you read in the papers around EV adoption at this time. Of course, this indicates the underlying trend continues to remain strong. Moving to slide 14. The battery energy storage system, or BES, as it’s called, continues to grow in leaps and bounds. Installed capacity grew by 52% last year and is predicted to grow by approximately 68% this year.

To date, the capacity growth is concentrated in just a handful of countries. As such, this is potentially the toe of a very large global market as other countries seek this energy solution. Moving to slide 15. This graph on the left is a representation of the breakdown of lithium demand between calendar year ’24 and ’25. And on the right hand side is a projection for the next six years.

Now moving to slide 16. To close, this slide outlines the longer term outlook for lithium demand. Forecasts indicate demand is expected to grow by 89 between now and the end of the decade, a compelling signal of the sector’s underlying strength. On the topic of tariffs and broader trade uncertainty, the potential impact on the lithium industry remains unclear. That said, there are a few important factors to consider.

Firstly, The US currently represents a relatively small share of global lithium demand, less than 10% as it relates to EV sales last year. While it’s an important future growth market, it is not the major driver of global demand today. Secondly, growth in lithium demand continues to be strong and organically driven in key markets, most notably China, where EVs have passed price parity with internal combustion engine vehicles last year driving broader adoption. This appears to be a sign of what’s to come. Lastly, tariff related uncertainty may also create headwinds of funding and development of new lithium supply.

In this context, companies like PLS with scale, a strong balance sheet, and established operations may be well placed to benefit from tightening supply dynamics over time. Time will tell. As for PLS, I can confirm we remain in full offtake compliance and hold no concerns regarding our sales order book. As a signal of market health, we recently placed a small cargo, which attracted strong buyer interest and achieved a market aligned pricing. Before we move to questions, I’d like to leave you with a few closing reflections.

The March marked a major step forward for PLS. We successfully implemented the P850 operating model. We completed and ramped up the p 1,000 expansion, and we welcomed a new growth asset with the cleaner project in Brazil. We’ve now entered a new chapter underpinned by a more scalable, efficient, and lower cost operating platform, Combined with our strong balance sheet and a strategically diversified portfolio, we are well positioned to navigate the current environment and capitalise as the market turns. While near term volatility remains, the long term fundamentals for lithium are compelling and continue to strengthen.

We remain confident that our disciplined execution of our strategy, our operational track record, and final and financial strength will provide a strong foundation to deliver long term value for our shareholders. With that, I’ll now hand back to you, Desmond, to open the floor for questions.

Desmond, Conference Moderator: Thank you. As a reminder, to ask question, please press 11 and wait for a name to be announced. To cancel your request, you can press 11 again. First question comes from Jonathan Sharp from CLSA. Please go ahead.

Luke Patolli, CFO, Pilbara Lithium (PLS): Hi, Jonathan. The first question you mentioned the dedicated team identifying and implementing cost reduction initiatives. Can you just elaborate on that a bit? What specific what are you focusing on, and what are the potential magnitude of sort of further cost savings? Thanks.

Dale Henderson, Managing Director and CEO, Pilbara Lithium (PLS): Sure. I’ll I’ll start on that, and then Luke might wanna fill the details. So and and it’s worth just reflecting. Going going back in time, as as the company grew and we were moved into a position where we could get on with investment back into the base, central to that was the same of taking us further to the left of the cost curve. So historically, that was about improving processing capability.

Much of that investment were at the back of completing the new crushing and all sort of the online analyzers and other tools to improve recovery in the plant. That’s been happening. We’ve improved our power this year in the form of LNG coming online. That’s about the carbon cost reduction. Brett mentioned in the mine that we’ve been moving through a transition to owner operate for mining.

So our own excavators. We’ve got our own people on the the whole fleet. We’ve got taken over drill and blast. By the way, all of that’s happened over the last twelve months. Then outside of that, as it related to the the plant, well, CSI, of course, departed side care of the new crushing ore sorting.

So we self perform in crushing ore sorting. There’s been this trend of taking over the core businesses. We’ve moved from contractors to owner operator. That all led us through to to cost reductions. And then that brings us to to really the outlook.

And Luke and team have have set up a very robust continuous improvement regime, which hunts for and implements further cost reductions. And there there’s a bevy of of smaller value items which are which are being pursued, but there is quite a a long list to to work with over time. But, of course, the the highest order cost out initiatives are scale, improved processing capability, taking over the core core business, and achieving higher recoveries. Luke, if you want to add to that?

Luke Patolli, CFO, Pilbara Lithium (PLS): I’ll add a little bit, but I’ll just be repeating a lot of what Dale said. At the moment, we’re going through the FY twenty six planning process, and the focus is across the board cost reductions. A key driver of the cost reductions in the next period will be the maturity of the operation, now that we’re moving to a larger production profile, the transition to the owner operator mining model, which Dale mentioned, reductions to capital spend, and then also looking at supporting overhead costs and how we can reduce those as well. So it’s really an across the board focus on cost reduction for FY 2026 that will reflect an organisation that has reached a nameplate capacity and maturity, which allows us to turn the dial further on cost reduction. Okay.

And just a quick question on recoveries. I know they dropped this quarter, and you mentioned it was due to P1000 Tyne ramp up. But what specific recovery rates are you targeting after the optimization in next quarter? Yes.

Brett McFadgen, Executive General Manager of Operations, Pilbara Lithium (PLS): Thanks, Jonathan. The recoveries that we have started to see coming out of our ramp up periods are certainly exceeding the mid seventies, low to mid seventies. So that’s where we know we can target, that 75%. Now it comes down to as Darla and Luke attested to as some of the cost saving initiatives is adding in some of the additional content material, which will affect recovery, but actually provides us with a cheaper unit cost as well. So you know, in terms of the plant, it can do the mid seventies, we think we’ll be able to get it higher in the next twelve to eighteen months.

But it’s really about what the quality of the feed that we can send it to and just, making sure that we’re targeting the right unit costs for the right outcome.

Luke Patolli, CFO, Pilbara Lithium (PLS): Okay. Thanks.

Speaker 4: Thanks for the insights. I’ll pass it on.

Desmond, Conference Moderator: Thank you for the questions. One moment for the next questions. Our next questions come from Hugo Nicolache from Goldman Sachs. Please go ahead.

Speaker 5: Morning, Dale and team. Thanks for the update this morning. Firstly, a question on strategy. If I look at the growth projects, the Pilgangara extension study has been deferred about eighteen months. The Kalina timing seems to be slipping a little bit as well.

I appreciate the current market conditions don’t support the original time lines of either of those projects. But you’re still GBP 700,000,000 net cash at the quarter, and you’re still highlighting the positive operating cash margins that you’re generating now and expect to continue to generate as the P1000 project ramps up. So I guess beyond the cash conservation strategy, how do we think about strategy near term? Do you still see yourself as a countercyclical acquirer, or do you already have enough optionality in the portfolio?

Dale Henderson, Managing Director and CEO, Pilbara Lithium (PLS): Hugo, thanks for the question. As it relates to the project timing, as it relates to the Kalina project Brazil, we’re continuing to progress that with the target drilling and studies, and there’s quite a detailed review process and train. And that timeline is principally driven that we think we can achieve more with that asset, but we need to we need to do more to to understand that in terms of studies and drilling. So that’s the principal driver of that. Although studies are very early stage, we also like the idea of lower lower capital entry for that project.

It’s too early to confirm that, but that’s a potential development. There is a potential development pathway there that the team needs to work through. So we are exploring that. As it relates to to p 2,000, yeah, obviously, it’s a big step up. We’re pushing that to the right.

One of one of the related factors is approvals timelines, but it makes sense for a number of reasons to to to push that to the right. To your point on count countercyclic acquisitions, well, we’ve got a full plate. And and and right now, the focus is is is is really consolidating on the base, ensuring we achieve this good ramp up, which we which we’ve done, making sure the June is successful as it relates to optimization, and really cementing our position as a low cost operator. That is that is the high priority. So that’s why we’re what’s giving our our focus at this point in time.

Speaker 5: Great. Thanks for that color, Dale. And then just a second one, if I can, just around some of the exploration targets and drilling. Obviously, resource update comes out in a couple of weeks, but just around the extension of the northern system. I guess what are you hoping to achieve there?

I mean if the northern system extends, does that help you recut the mine plan and access some shallower material and maybe push out into the well longer term the need to go underground? Or is it too early to tell?

Dale Henderson, Managing Director and CEO, Pilbara Lithium (PLS): Too early to tell, but, yeah, there is potential for some beneficial tonnes for for the mine plan, but it’s too early to confirm that. But much like the drilling we’re doing at Colina, we’ve been very targeted around what we’re looking to do there. And, yeah, the good news about the Pilbara Gora asset is it’s an incredible system. And and in the years to come, when the time is right, we’ll we’ll get the rigs back out there in force. But for now, it’s just very much targeted because we think it potentially is in our interest to improve the mind plan in the in the near term.

Luke Patolli, CFO, Pilbara Lithium (PLS): Thanks, Dale. Pass it on.

Desmond, Conference Moderator: Thanks, Shiga. Thank you for the questions. One moment for the next question.

Dale Henderson, Managing Director and CEO, Pilbara Lithium (PLS): Is there a question? Seem to have an issue. Can we can we go to webcast for a while?

Speaker 6: We seem to be having some technical problems with the with the queue, so we’ll just move to webcast questions while we get those sorted. So, Dale, one question here from a shareholder is, in your opinion, do you think the shares in PLS have been oversold, and where do you see the company in five years from now?

Dale Henderson, Managing Director and CEO, Pilbara Lithium (PLS): A couple of big questions. Now to the first part, of course, I think they’re oversold, but, you know, of course, I would say that. As to where do we see the company in in five years, that’s a a really exciting question when you consider the growth outlook for the lithium industry and PLS’s position within it. We have an enviable position given the strong foundation we’ve built, the absence of really other major players supporting this massive growth industry. That coupled with the pipeline of of growth options that we can navigate to market over time when the market best supports us.

So that sets the company up, I think, for an incredible trajectory over the next five years. Now what that could lead to, well, that that’s the exciting, question, the executive and board, get to to work with.

Desmond, Conference Moderator: Thank you for your patience. We now have the questions from Kate McCutchen Please go ahead.

Dale Henderson, Managing Director and CEO, Pilbara Lithium (PLS): Great. Thanks, Tizman.

Speaker 7: Kate. Morning, Hi. You’ve got the government funding for the midstream. Do you have clarity around the 10% production cap credits and whether that’s applicable to spodumene processing, or is there any government benefits slated in the medium term? And just tying in, are we still gonna get an update on medium term, how to think about the p 1,000 or p eight fifty costs, or will FY ’26 guidance be a good guide for that?

Dale Henderson, Managing Director and CEO, Pilbara Lithium (PLS): Yeah. Sure. Thanks thanks, Kate. So as it relates to to midstream, we’ll have to come back to you on the production tax credits. I’m pretty sure it does qualify for that.

However, as it relates to that midstream demonstration project, that was sized as a demonstration project, not necessarily with the expectation of a large revenue earner. Obviously, it’s it’s price dependent on the overriding lithium market. Now if the tax credit is attributed to that, well, of course, that helps. But the underlying driver for that demonstration project is to approve up the concept, validate unit cost, validate price of product, and from that, use that as a stepping stone to a larger deployment. But we’ll happily happily take production tax credits and any other benefits the government would like to to provide.

As it relates to the second question, I’ll hand to Luke.

Luke Patolli, CFO, Pilbara Lithium (PLS): No problem. Hi, Kate. So with respect to a midterm view on cost, we will provide guidance for the full year ’twenty six period at the full year ’26 results. It will be a view to what our mid term cost structure is because the Pilganguru operation will achieve nameplate. But obviously, over the mid term, the mine plan will fluctuate, which will have an impact on cost.

But we don’t intend to provide a midterm target, but FY twenty six will be indicative of that.

Speaker 7: Okay. Got it. So just to clarify, going back to the production tax credit, putting aside the midstream, you need to clarify if there’s anything for Pilganglour or there’s not at the moment? It’s just the downstream.

Dale Henderson, Managing Director and CEO, Pilbara Lithium (PLS): You’re for for the concentrate, Kate. My understanding is no. The production tax credit is not attributed to spodumene concentrate production.

Speaker 7: Thank you. And then just on the p 1,000 ramp up. So you’ve given us those metrics in slide six. Thank you. How do we think about the ramp up to get to that?

Is it 4,900,000 tonnes of ore throughput a year? I think it is in that recovery ramping up towards 75 ish. What does the next twelve months sort of look like? I know we don’t have guidance, but when can we expect those nameplate metrics?

Dale Henderson, Managing Director and CEO, Pilbara Lithium (PLS): Sure. I’ll offer a comment, and then Brett can then fill. So in in the very immediate term, it’s we’re stepping into the optimization phase. Watch we run that now. What that means is moving from from the ramp up, so we’re now in effectively steady state and tuning tuning the operation.

Now all going well, we we expect the bulk of that to be completed in the June. There’s potential some of that moves into the September, but the team is certainly working hard to try and complete the bulk of that in the June such that as we step into next financial year, we are at nameplate or close to. As it relates to long term recoveries, we’ve not changed our targets there as it relates to long run, 75% of our average head growth. As it relates to the more medium term, specifically next year, that that will be a product of the budget process, which we’re in the thick of now. We are contemplating different ore feed strategies for the purpose of lowest cost production.

Now there’s potential in that that in targeting a lower unit cost that might take a minor hit to recoveries. But for clarity, we haven’t made any decisions around this. We’re in the planning phase. And ultimately, that guidance will come later, as Luke’s mentioned. Brett, did you want to

Brett McFadgen, Executive General Manager of Operations, Pilbara Lithium (PLS): add to that? Look, no, there’s not a lot more to add exactly as you said, Dale. But it is pleasing to see that you know, in the early ramp up parts, we have seen the the circuit perform very well, and that bodes well for for our budget planning for FY ’26 and beyond.

Speaker 7: K. That’s helpful. Thank you.

Dale Henderson, Managing Director and CEO, Pilbara Lithium (PLS): Thanks, Kurt.

Desmond, Conference Moderator: Thank you for the questions. Our next question comes from Glyn Lawcock from Darren Joy. Please go ahead.

Speaker 8: Morning, Dale. Firstly, just on the POSCO JV and the exercising of the option extension. Have you had to give anything away to to get that out of POSCO?

Dale Henderson, Managing Director and CEO, Pilbara Lithium (PLS): Good day, Glenn. There’s a few minor commercial matters which were tidy up part of that. But, really, what what sort of is more important trumps all of that is is the the strategic collaboration we have with with with POSCO. We approached POSCO about seeking this extension to which they’ve provided that. We’re really grateful for that, and and we’re, yeah, we’re of our association with the POSCO and excited to see where we can take the relationship over time.

Speaker 8: You know, just under your approach then to have the extension, what was the basis for that approach? You just because of the slow ramp up and everything else that you just wanted more time, and they were quite amenable by the sounds of it?

Dale Henderson, Managing Director and CEO, Pilbara Lithium (PLS): No. No. Two two items there, really. The first is, yes, it provides more time, which is great in terms of being able to observe the performance. But more importantly for us, it’s about cash preservation as we think about the outlook for the business.

Speaker 8: Okay. That’s great. And then maybe one for Luke. Luke, mean, obviously, you’re leading a team to try and pull costs out to think about the business. I mean, if you think about the business on a whole operating costs, your sustaining CapEx, stripping and your lease payments, do you think with an $800 spodumene price today, if it doesn’t move from here, can you envisage you can get this business as a whole to make cash?

Or is that going to be a struggle, you think, on an all in basis?

Speaker 4: So

Luke Patolli, CFO, Pilbara Lithium (PLS): the suite of cost reduction initiatives that we’ve put in place and the ongoing cost reduction initiatives that we’re examining now across all parts of the business, operating costs, CapEx, overhead costs, are really with the aspiration to limit cash burn as much as possible at the prices that you’re referencing. I can’t speak exactly to what you’re asking for because it will come out in our planning process. But yes, certainly with that aspiration over the over the short term and interim.

Speaker 8: Yeah. Appreciate it. It’s a tough environment. Thanks very much.

Desmond, Conference Moderator: Thanks, Glenn. Thanks for the questions. One moment for the next question. Next question comes from Ben Lyons from Jarden Securities Limited. Please go ahead.

Speaker 9: Thank you. Good day, Dale, Luke, and team. Yeah. It’s a it’s a tough environment as as Glenn clearly pointed out. But in your introductory remarks, you referred to your fortress balance sheet, and we continue to observe a cash balance of over a billion dollars through this prolonged period of, weak lithium prices.

So and and, again, right further to that, despite those incredibly robust balance sheet settings, which put you at a clear advantage versus your peer group, shareholders have had to endure a prolonged period of share price underperformance versus that peer group. So my question is a really simple one. Has the board considered implementing a buyback? Thank you.

Luke Patolli, CFO, Pilbara Lithium (PLS): Yeah. Do you want me to start that?

Dale Henderson, Managing Director and CEO, Pilbara Lithium (PLS): Yeah. Go for it.

Luke Patolli, CFO, Pilbara Lithium (PLS): So I’ll start. We have considered buybacks from time to time and we’ll continue to do that. Management and the board continuously make capital allocation decisions within the capital management framework that’s been outlined to the market. In the current environment, where the management team and board have landed is that ensuring we have a strong liquidity position to withstand persistently lower prices is of utmost importance. As and when the market improves and there’s surplus capital available, we will consider then the most value accretive options for shareholders, and that will certainly include a potential buyback.

Desmond, Conference Moderator: Yep.

Dale Henderson, Managing Director and CEO, Pilbara Lithium (PLS): Nothing to add yet. No. Thanks, Ben.

Speaker 9: Okay. Okay. Thanks. And then further to the line of questioning from both Kate and Glyn, yeah, around the sustainable op cost settings for this business. Back in the June quarter of twenty four when the operation was absolutely humming, you achieved, FOP costs of less than $600 a year ton.

And and as we look forward, you know, fiscal twenty six should be an uninterrupted year of p eight fifty production settings. So is there any conceptual reason why you wouldn’t be targeting similar levels below that $600 a tonne level? Thanks.

Dale Henderson, Managing Director and CEO, Pilbara Lithium (PLS): Yep. Yep. And, yeah, we’re deep into the planning process now, and, yeah, we’ll we’ll reveal all once we’ve completed that as part of our guidance. But we’re in good standing. We really are in terms of where I think we will land relative to those levels, but I prefer to wait until we’ve carried the one, done the numbers, we can come out with confidence.

But, yeah, we we are in a really good position, care of all the investment we’ve done. The new fleet, taking over drilling blasts, the new plant with all the whistles and bells, we’re and and the scale. So there’s there is an element of economies of scale. All of that puts adds through to what what what will ultimately be an improvement in unit cost. So I’m sorry I can’t give you numbers today.

Speaker 9: No. No. That’s all good. I can see the unit cost coming down. The balance sheet’s really robust, and you’re thinking about a buyback.

It’s all very positive. Thanks, man.

Desmond, Conference Moderator: Thanks. Thanks, Ben. Thank you for the questions. Next question comes from Rob Stein from Macquarie. Please go ahead.

Dale Henderson, Managing Director and CEO, Pilbara Lithium (PLS)0: The P 2 Thousand expansion, any investment in Kalina, do you evaluate that against the buyback and what the, you know, the IRR of investing in your base business would be? Because I would imagine at these levels, nothing has a better risk return than buying back your stock here.

Dale Henderson, Managing Director and CEO, Pilbara Lithium (PLS): Good day, Rob. Yeah. Thanks. I think I missed the front of that, but I I think I got the gist of it, which was evaluating share buyback relative to the other investment options for the business. And the short answer is, of course, we will we will complete that evaluation in accordance with their capital management framework.

And, yeah, and all of these avenues get sort of evaluated side by side. So the short answer is yes. That evaluation will continue to happen.

Dale Henderson, Managing Director and CEO, Pilbara Lithium (PLS)0: Okay. And then just in terms of strategically how you potentially navigate the down cycle and what you do to, you know, use scrip to buy Latin, which which proved to be a really wise move given your share prices dropped since your script is is an asset to you in any type of m and a situation given your strong balance sheet. Is that something that you’re, you know, potentially, strategically, you’ll look to to manage to, in fact, try to find a point in the cycle over the next one or two years when it does make sense to acquire assets using that script to do so?

Dale Henderson, Managing Director and CEO, Pilbara Lithium (PLS): Yeah. So so you’re quite right, Rob. Obviously, that avenue is available to us. As I mentioned earlier, really, the the key focus for us is the core operations at this point having got to the back of the investment cycle. What what we’re looking to do is really capitalize on on that investment.

That is that is priority one, and and we already have sort of a full bevy of of of options secured that we can pursue for growth when the market supports. So as I say, focus is the core operation.

Dale Henderson, Managing Director and CEO, Pilbara Lithium (PLS)0: Thank you.

Desmond, Conference Moderator: Thank you for the questions. One moment for the next questions. Next questions comes from the line of Levi Spry from UBS. Please go ahead.

Dale Henderson, Managing Director and CEO, Pilbara Lithium (PLS)1: Hi. Good day, Dale and team. Happy Easter, everyone. I’m fairway down the list. I think think some of this ground’s been covered, but I really just want to understand, firstly, on the POSCO piece and then the planning process, you know, around price.

So the deferral of the POSCO option, is that around price, or is it around, like, costs? I how you’re thinking about the cost in the downstream. And then maybe, Luke, just as you’re going through this budgeting process, you know, can you talk to, you know, how you’re thinking about modeling the the the the price scenarios, I guess?

Dale Henderson, Managing Director and CEO, Pilbara Lithium (PLS): Yeah. Good day, Levi. Yeah. As it relates to the POSCO deferral of the of the call option, which we covered a little earlier. Sorry if I got your question right.

Please correct me if I haven’t. This is about cash preservation. And, of course, we get the the other the other benefit of more time to to observe the performance of the operation. So that’s that’s the principle reason there. Does that answer your first question?

Dale Henderson, Managing Director and CEO, Pilbara Lithium (PLS)1: Yeah. Kind of. Or, yeah, so monitoring the performance of it. You know? So that means operating costs.

So I may imagine volume and operating costs and and therefore margin. So, yeah, I kinda get that. May maybe just on, you know, the budgeting process then, you know, how how are you managing managing that cost, your business cost line versus your expectations for price? Is it against spot?

Luke Patolli, CFO, Pilbara Lithium (PLS): Yes. Thanks for the question, Levi. So the budgeting process is really a broader planning process that involves my planning team, capital team, corporate team and various other inputs across the organisation. It’s a pretty thorough and broad process. The reason I say that is because we adopt the same thoroughness to when we think about what are the potential scenarios going forward.

So we of course think about price scenarios that are higher and price scenarios that are lower than spot. I’ll hand it over to Dale, but I would say, at least in his current market environment, and from what we can see, the potential for upside is more significant than downside given that if you look across the cost curve, there are a large number of operators that are operating at a loss at the moment, but I’ll hand it out to some pricing outlook.

Dale Henderson, Managing Director and CEO, Pilbara Lithium (PLS): Yeah. No. I think it’s covered. Look. I think we’re in a a good a good standing.

I think, yeah, let’s let’s just look to to cover the the slides. Your demand outlook looks amazing. Yep. And as we said, supply side’s struggling, including what you’d expect to be the lowest cost largest operators. So something has to to give in that scenario.

Yeah.

Dale Henderson, Managing Director and CEO, Pilbara Lithium (PLS)1: Yep. Got it. Thank you. Happy Easter. Thanks.

Dale Henderson, Managing Director and CEO, Pilbara Lithium (PLS): Happy Easter, Levi. Thanks, mate.

Desmond, Conference Moderator: Thank you for the questions. One moment for the next questions. Next up, we have Al Harvey from JPMorgan. Please go ahead.

Speaker 4: Yeah. Morning, team. Just another one on the POSCO JV. So just wanted to get a sense how you’re thinking about that. I suppose you’ve mentioned train two will reach certification later in 2025.

Are you willing to put a more, I suppose, firm date on on when you think that might occur? I suppose it is important. I think back of the envelope, it’s around Aussie $200,000,000 to exercise. Correct me if I’m wrong. And then I suppose just to follow on from that, how you’re thinking about how that that number could compare to a fair value valuation of the of the asset if you if you don’t pull the cost cost option.

Dale Henderson, Managing Director and CEO, Pilbara Lithium (PLS): Yeah. Good day, Al. Yeah. So your timing is obviously, for that decision, out out to the right, that the value of of that’s based on the equity subscription plus a small escalation factor, that would be a lower cost entry point than the fair value. We haven’t disclosed fair value estimates, but I think it’s fair to presume that would be a value much higher.

As to more broadly the progress of of the plant and how the how the team is going over there, we are very positive on what we’re seeing. Obviously, the construction itself was was well executed. And as we’ve been observing the ramp up, that too is going very well. And as we’ve noted in the release today, the certifications which have been secured for the first trainer were some of the best in the business in terms of buyers and Watson train more certification. So not yet finalized, but on its way.

So that’s looking good. And then as it relates to the second train and as noted in the quarterly, that volume, that production volume is is being managed such that we get certification because, obviously, you get a higher price once the product’s certified. So so that that so that’s sort of filling some of the gaps for you.

Speaker 4: Yeah. It does. Thanks, Dale. Maybe just a second one for me. Just wanted to clarify the earlier comments on recovery.

So, obviously, you’re still looking at different feed strategies, but I just wanted to clarify, if you did feed in a higher proportion of contaminated material, could you still get to that kind of 75% recovery target, or is that 75% target kind of predicated on, you know, optimized clean feed?

Dale Henderson, Managing Director and CEO, Pilbara Lithium (PLS): Sure. I’ll hand to Brett on that one. Just to close on the last question, the team’s handed me a note. At at an exercise price for equity today, it would be about 60,000,000 Aussie on that one. So hopefully, that helps sort of quantify.

It’s smaller in the scheme of things. As of moving to the recovery question, you wanna speak to that one, Brett?

Brett McFadgen, Executive General Manager of Operations, Pilbara Lithium (PLS): Yeah. Thanks, Al. The, yeah, the recovery of 75 in our long term life of mine recoveries is predicated on the work we did with the ore sorters. The advantage we have with the ore sorters is able to add in more of the stockpiled content material, which drops our mining rates, which then gives us that unit cost benefit. That’s really the trade off that we could do with targeting slightly lower recoveries.

Having said that, the optimization for the plant will always continue to target higher recoveries. It’s the bread and butter of the plant. So I wouldn’t expect to see the recoveries going down into the into the late sixties. They’ll they’ll hold pretty well around the seventies, I believe, in the future.

Dale Henderson, Managing Director and CEO, Pilbara Lithium (PLS): And probably just

Speaker 4: add Thanks.

Dale Henderson, Managing Director and CEO, Pilbara Lithium (PLS): Add, Al, the optimization phase will be key to to understanding where we might be able to take things in time. You know, going back in the years, a lot of test work was done, a lot of modeling. But in terms of where can you push the ceiling to, you don’t really know that till you start operating at scale, and we’re we’re early into that process. But we are pretty optimistic on where we can take things in the knowledge that we have got some fantastic processing capability that we didn’t have previously, whether it’s the all sorting of the front end, the online analyzers, upscale the WIMs, which is the high intensity magnets, which can rip out iron related materials. You know, all of the above are new tools the operating team did not have at this level previously.

So if you cast your mind back, we we were already having very high recoveries in the mid seventies or sort of ’73 around that sort level pre this capability. So interested to see how we go in time. And and, ultimately, if it goes well, we’ll we’ll get to rerate the reserve, which would be pretty awesome if we can do that.

Speaker 4: Yep. Thanks, Dale. Maybe just back to the option, the $60,000,000 number. So I just kinda thought my understanding was the build was about US $900,000,000. So 12% at cost would have been a bit higher once you factor in some interest, but, yeah, maybe it’s one I can take offline.

Dale Henderson, Managing Director and CEO, Pilbara Lithium (PLS): Yeah. We’ll we’ll take we’ll come back to you on that one, Al, if that’s alright.

Speaker 4: Sure. Thanks, Dale.

Speaker 6: Okay. I was gonna take some questions from the webcast. First question, when do you foresee prices of spodumene recovering, and what impact does the tariff does the tariff have on production and sales forecast for the company?

Dale Henderson, Managing Director and CEO, Pilbara Lithium (PLS): Great questions. The, yeah, the the current price mismatch is is hard to reconcile given what we’ve covered today, the strong demand, the fact that much of major operators are losing money at this pricing. It does does not compute. I think part of the reason for that is is the market is somewhat dysfunctional given that we’re still working with reported prices rolled up through price reporting agencies, not not live trading platforms as seen in other mature markets. I think that’s part of the explanation for the price dynamics we see today.

What we have seen historically, you know, a care of that dysfunction is price has historically snapped back much to everyone’s surprise. Maybe that occurs again, we don’t know. But as to timing, yeah, incredibly hard to predict. But, of course, we’re very optimistic given the low pricing pricing deep into the cost curve, the strong the strong demand outlook. That has to move up is our view.

Question as well.

Speaker 6: Okay. Thanks, Dale. Next question. Where does PLS sit on the spodumene cost curve, and are the Pillarite resources cost effective now?

Dale Henderson, Managing Director and CEO, Pilbara Lithium (PLS): As it relates to where PLS sits on the cost curve, really the best indicator of that will come as part of our next set of guidance for the financial year ahead. Why? Because we will be able to build into that the strength we’re expecting care of all the investment that we’ve made and the new plant and what we’ve covered in this call. As to lepidolite resources, are they cost effective? Our understanding is no.

It’s a higher cost of lithium units, much higher than the better spodumene concentrate and better brine sources. And understanding is some of the operators of those the pitilite operations are doing so because they can manage out and or absorb those costs elsewhere within their business. So, yeah, our view is the pitilite’s higher cost. Okay. With that, that completes the I’d like to thank everyone for dialing in today.

The March has been a huge quarter for the business, a very successful ramp up quarter, and we are well positioned for the future. So with that, I’d like to thank you all, and we look forward to updating you in the future. Thank you very much.

Desmond, Conference Moderator: That does conclude today’s conference call. Thank you for your participation. You may now disconnect your lines.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers
© 2007-2025 - Fusion Media Limited. All Rights Reserved.