Ground Breakers: PLS banked an extra $8.5m this quart- Oh wait… PLS banked an extra $8.5m every day this quarter

• Pilbara Minerals banks almost $800 million cash in record quarter at Pilgangoora lithium mine
• Boss Dale Henderson says lithium markets poised to remain strong in the short term, with dividend policy now on agenda
• Materials stocks drop 1.23% in early trade

With lithium prices like these it’s no surprise Pilbara Minerals (ASX:PLS) is going from strength to strength at the moment.

The September quarter has again blown previous records out of the water, with an average sales price of US$4266/dmt on a 5.3% Li2O product grade, equivalent to US$4813/dmt on a 6% basis, up from US$4267/dmt (SC6) in the June quarter.

Production of 147,105 dry metric tonnes was up 16% on the June quarter, delivering an annualised production rate of 588,000t in line with the ramp up to full capacity of the 180,000-200,000tpa Ngungaju plant, with shipments of 138,249t of spodumene concentrate above 132,424dmt in the prior three months.

But those numbers aren’t the ones you’re after.

Check out this one. PLS more than doubled its cash balance from $591.7m to $1.375 billion in just three months to September, a radical $783.7m increase in a touch over 90 days.

At the same time, the miner bucked a trend of inflation and escalating costs across the sector, with unit costs coming down from US$462/dmt or $648/dmt in the June term to US$434/dmt or $635/dmt, at the lower end of its $635-700/dmt guidance range for 2022-23.

Did I hear someone say dividends?

It looks like they could be coming next year once some tax and debt covenant issues are ironed out, with PLS expecting strong conditions in the lithium market to continue in the short term.

“In terms of market commentary it’s been a really strong market through the September Quarter,” PLS CEO Dale Henderson said on the company’s quarterly call this morning.

“We’ve seen appreciation of pricing essentially from all indicators.”

Henderson said Platts’ latest update overnight showed appreciation in every lithium chemical price point in China and elsewhere, with demand from the growing electric vehicle market continuing to drive prices amid a supply shortage.

“Obviously the strongest indicator for us is the spot market sales we’ve been having.

“As for customer inquiries, they continue to try beat down the door, the phone won’t stop ringing, my phone is set to silent and it’s just a function of the market we’re in and long may that continue.”

“We don’t see anything that gives us cause for concern in the short term, as to the mid term absolutely new supply is coming we all know that.

“But based on our analysis we’re not too concerned as we look at the combination of increased supply plus increased demand. Longer term, beyond that of course it gets much harder to predict.”

Demand for lithium is so high converters are willing to take DSO grade product alongside typical 5-6% spodumene shipments.

PLS sold 45,041dmt of a middlings 1.2% Li2O concentrate produced during commissioning of the Ngungaju plant during the quarter at a price of around US$495/t in China.

Henderson said the company was trying to get a capital management policy out the door by Christmas.

While cash is plentiful right now, it will need to balance returns with the company’s growth objectives, including the construction of its 43,000tpa lithium chemical JV with POSCO in Korea and the staged ramp up of the Pilgangoora mine in WA to 680,000tpa and later 1Mtpa.

“Obviously we’re generating a fair bit of cash and the expectation is pricing is going to stay strong and we’d expect that cash build to continue,” CFO Brian Lynn said.

“So it is fairly important that we find a good balance between what we return to shareholders but also what we try and use to grow the company.”

Pilbara Minerals (ASX:PLS) share price today:

A quick overview of the morning market

Lithium mid-tiers were in fine form with Sayona (ASX:SYA), Liontown (ASX:LTR) and Core Lithium (ASX:CXO) all among the top gainers.

Outside of that the blue chips dropped, taking the materials sector down 1.23%.

Energy was down 0.79%, with the resources stocks the main drag on the ASX 200.