Lithium miner Pilbara Minerals clinches funding package for Pilgangoora expansion

Pilbara Minerals (ASX: PLS) has secured additional backing from two Chinese customers which will underpin a $156.4 million funding package for the expansion of its Pilgangoora lithium-tantalum project in Western Australia’s Pilbara region.

Emerging from a trading halt today, Pilbara Minerals said it had bedded down funding terms with both Jiangxi Ganfeng Lithium and Great Wall Motor Company to bankroll an increase in Pilgangoora’s throughput to 5 million tonnes per annum.

This would equate to forecast production of up to 850,000tpa of spodumene concentrate over 17 years.

The funding package comprises a $35.5 million offtake pre-payment facility, a $50 million equity placement to Jiangxi Ganfeng Lithium and a proposed $70.9 million Nordic bond.

Once the funding package is completed, Pilbara Minerals expects the combination of existing cash and future cash flow generated from stage one of operations to fully fund stage two – earmarked to cost $231 million.

Pilbara Minerals is targeting the commissioning of stage two from the March quarter of 2020. The company will also consider potential for a further stage three expansion in response to strong customer demand, which could ultimately take output to 7.5Mtpa.

News of funding for the expansion comes just a few months after the firm shipped its maiden lithium concentrate from the project.

Charging towards global producer status

The Perth-based company is maintaining a bullish outlook for the lithium market as it seeks to play a key role in filling lithium supply, with ambitions to become a major global lithium producer.

The positive sentiment flies in the face of a 2018 Morgan Stanley report which claimed prices of the metal would plunge.

Pilbara Minerals managing director and chief executive officer Ken Brinsden said Pilgangoora was rapidly being recognised as one of the most important new lithium raw material projects globally.

“Our key customers have recently visited site and they clearly like what they have seen,” he said.

“They are now fulfilling their commitments by providing capital to underpin the stage two expansion in order to secure their full stage two offtake allocations.

“This should send a clear message about the robust outlook for the lithium market as far as our Tier-1 customer base is concerned and demonstrates the secure position the world-class Pilgangoora project commands as part of a global lithium-ion supply chain that is growing rapidly.”

Providing an update on the plant’s ramp-up, the company said Pilgangoora was performing in line with expectations with steady improvements being achieved in both recovery and plant utilisation.

Production for the month of December 2018 was 23,500 dry metric tonnes of spodumene concentrate, equivalent to an annualised production run rate of about 280,000tpa of spodumene concentrate.

Demand emerging from South Korea

The miner released a swathe of news today, with Pilbara Minerals also announcing the signing of a non-binding memorandum of understanding (MoU) with POSCO to evaluate a larger joint venture downstream chemical conversion facility in South Korea.

The MoU recognises an increase in the existing spodumene concentrate offtake agreement from the Pilgangoora project from 240,000tpa to 315,000tpa to support the larger chemical facility.

Due diligence activities assessing the proposed JV are underway, however Pilbara Minerals’ right to participate as a 30% partner in the chemical plant will have to be exercised before 28 February 2019.

Commenting on the MoU, Pilbara Minerals said it was pleased to be working with POSCO to develop and expand a new lithium raw material supply chain for South Korea.

WA in lithium box seat

WA is currently in the drivers’ seat of the lithium boom, with rampant demand for devices and product that use lithium-ion batteries boding well for producers.

Just next door to the Pilgangoora deposit is lithium producer Altura Mining which celebrated the first shipment of product from its namesake project last September.

In addition to growing lithium production in the Pilbara, WA is set for more downstream facilities.

Late last year, Albemarle, the world’s largest lithium producer, received environmental approvals to build its proposed $1 billion lithium hydroxide plant in the state’s south west.

Once operational, it is expected to be WA’s largest lithium hydroxide plant and will process 1Mtpa of spodumene concentrate sourced from Albemarle’s 49%-owned Greenbushes mine.

At a national level, the Australian Government communicated the opportunity the $213 billion lithium-ion battery value chain presents to the country in an industry report titled, The Lithium-Ion Battery Value Chain – New Economy Opportunities for Australia.

The Australian Trade and Investment Commission report drew on similar findings published earlier this year by the Region Development Australia and Association of Mining and Exploration Companies, which urge the federal and state governments to act now so Australia can capture a slice of the trillion-dollar lithium battery pie in years to come.

Pilbara Minerals’ shares were buoyed on the string of announcements, gaining 16.8% to $0.730 in afternoon trade.