Pilbara Minerals suspends operations after death at Pilgangoora lithium-tantalum mine

Pilbara Minerals ASX Pilgangoora suspicious death police investigating
Police are investigating a death that occurred at Pilbara Minerals' Pilgangoora lithium mine in WA.

Operations at the Pilgangoora lithium-tantalum project owned by Pilbara Minerals (ASX: PLS) have been temporarily suspended this week after an alleged altercation onsite led to the death of a male employee.

Officers from Perth’s homicide squad were called to the remote mine on Monday to assist local police and detectives with an investigation into the death, which is believed to have occurred after a fight broke out following a morning pre-start meeting.

The death has been confirmed as unrelated to mining operations at the site.

A 30 year old man is believed to be in custody and assisting with the investigation.

Managing director Ken Brinsden said the company was offering support to workers at the mine, located 130 kilometres south of Port Hedland.

“On behalf of Pilbara Minerals, I would like to express sincere condolences to the affected people and their families,” he said.

“At this difficult time, our focus is on ensuring our people are cared for and supported, while we continue to support the police investigation.”

Pilbara Minerals entered a trading halt on the ASX immediately following the incident.

Normal trading resumed this morning.

Moderation strategy

A softening lithium market and reduced customer demand has had an impact on operations at Pilgangaroo, with Pilbara Minerals deciding to “moderate production in response to customer requirements and market conditions”.

Operations were curtailed during the September quarter, resulting in mining activity, processed tonnes and shipped concentrate being well down on prior quarters.

“While June and the entire September quarter were challenging for [us] and for the global lithium raw materials sector, our team has responded quickly and decisively to these short-term market challenges,” Mr Brinsden said.

“Despite difficult decisions having to be made, the response of management and the board to market conditions ensures value is maintained in the Pilgangoora asset for the long-term and we can respond as [market] demand improves from here.”

As part of the current moderation strategy, December 2019 half sales will be supported from existing run-of-mine ore, crushed ore and final product stocks on hand.

The company has also rationalised its workforce numbers, making 40 positions redundant across the mine, processing plant and Perth office.

“This is a sensible and prudent response to modest demand conditions currently being experienced in the Chinese market,” he said.

Focus has turned to completion of plant rectification and improvement works designed to ensure Pilgangoora can achieve a ramp-up to steady-state production, including improved recoveries and lower operating costs, before the end of the 2019 financial year.

Market downturn

The world’s lithium raw materials industry is being impacted by weaker demand conditions in China – where virtually all of today’s spodumene concentrate is delivered – as a result of changes to the subsidy regime to support the nation’s electric vehicle production.

While production of electric vehicles is still growing in China, the relative pace of growth has tempered over the last 12 months, resulting in lower demand for lithium chemicals and thereby altering the price.

This has also impacted the spodumene concentrate market, where pricing as reported by Platts (S&P Global) was USD$545 per dry metric tonne as end September.

“The slower uptake of the Chinese subsidy regime, which now supports higher nickel content batteries, has resulted in persistent weak market conditions for lithium chemicals,” Mr Brinsden said.

“However, in the medium term, stronger support for lithium raw material demand growth should occur as a result of sourcing initiatives currently underway by battery and car manufacturers which is expected to lead to increased demand for lithium-ion batteries within and outside China.”

Pilbara Minerals expects its offtake partners will be able to comply with their full commitments once they are “sufficiently advanced” in the ramp-up of their respective chemical conversion capacity, have drawn down their existing inventories, and as overall demand conditions improve.

At mid-afternoon, shares in Pilbara Minerals were down 1.54% to $0.32.