Monsters of Rock: Pilbara cuts back as more lithium miners pull supply

Pilbara Minerals pauses plant and cuts production, warning current lithium prices are ‘unsustainable’
Capricorn taps investors for $200 million to expand WA gold output
Materials sector sags, with gold names leading the way

Pilbara Minerals (ASX:PLS) says spodumene prices need to top US$1400/t for the lithium market to be sustainable in the long-term as it curtailed production by placing one of its two processing plants at the Pilgangoora lithium mine in WA on care and maintenance.

PLS also paused spending on a mid-stream demonstration plant part-funded by the Australian government, sending shares of its technology partner Calix (ASX:CXL) spiralling.

The move to shut the Ngungaju plant, acquired in its takeover of collapsed neighbour Altura Mining, will curb 100,000t of spodumene concentrate production this year, taking more material out of an oversupplied market.

It follows moves from peers such as Mineral Resources (ASX:MIN) and Arcadium Lithium (ASX:LTM) to pull supply or expansion plans from the market.

“Spodumene pricing is approximately US$750/t, well that’s approximately half the consensus long term price of US$1400 per dry metric tonne,” PLS MD Dale Henderson said on a call with analysts, investors and media.

“We’re expecting price movement upwards over time because this is simply unsustainable.”

But he said it was “no surprise” to see prices plumbing in the deeps after the massive run up in prices that brought new sources of supply online.

“What we’re witnessing is a rebalance following the very strong pricing period that occurred in 2021 and 2022, there is just more to go in our view in this rebalance and ultimately price appreciation, which could happen very rapidly as we’ve seen historically,” Henderson said.

He remains bullish on the EV market, the main source of lithium demand, saying high penetration markets China and Norway are a “window to the future”.

PLS produced 220,100t of average 5.3% Li2O concentrate in the September quarter at an average realised price of US$682/t, down 19% on the June quarter, with revenue falling 31% from $305m to $210m.

Unit operating costs on a CIF basis fell 1% from US$483/t to US$480/t, with cash in the bank down 17% from $1.6bn to $1.4bn.

With the closure of the Ngungaju plant the P1000 project has been moderated to P850, all through the main Pilgan plant at the Pilgangoora project near Pilgangoora.

Guidance for FY25 has dropped from 800-840,000t at FOB unit costs of $650-700/dmt to 700-740,000t at $620-640/t, with capex shaved from $615-685m to $565-610m.

Capricorn rising

Capricorn Risings are, reportedly supposed to be calm, cool and collected.

That’s certainly the vibe, for the most part, with Mark Clark’s Capricorn Metals (ASX:CMM).

It was Capricorn Raising today, announcing a $200 million placement at $6 per share – a 4.9% discount to the gold miner’s last closing price of $6.31 and 6.3% discount to its 10-day VWAP.

The cash will be put to use expanding the Karlawinda gold mine from ~120,000ozpa to 150,000ozpa from the end of FY26 in a $120m project to expand its processing capacity.

At $3300/oz, the project would be paid back in 20 months, CMM said. Gold is currently at record spot prices of $4249/oz.

CMM says the raising will also help fund early capital spending on its $260 million plant at its growth limb, the Mt Gibson gold project, with installation of a $30m accommodation village almost done.

The raising means it will be able to bring forward $30m of exploration as well, with $60m to cover working capital and costs of the offer.

The $2.4bn gold miner believes it will be able to avoid hedges or taking on additional debt to construct Mt Gibson.

The materials sector dropped 0.46% despite high gold prices sending precious metals stocks higher.