Monsters of Rock: Pilbara Minerals reveals ambitious expansion plans in bid for lithium supremacy

Pilbara Minerals reveals plans to expand Pilgangoora mine further to ~2Mtpa, rivalling scale of world’s biggest spodumene lithium mine Greenbushes
Comes as lithium stocks are dumped following bearish WoodMac price forecasts
Jervois Mining attacked by US conspiracy theorists on X over wild water theft allegations

There’s a global race on from Australia to South America to China and beyond to dominate the market for lithium supply.

And ASX market darling Pilbara Minerals (ASX:PLS) today laid out its strategy in recently dried black ink, delivering a study that shows it could almost quadruple production at its giant Pilgangoora mine in WA’s Pilbara.

That would bring it in competition with the mighty Greenbushes for the title of the world’s biggest spodumene producing mine, albeit at far lower grades.

While lithium prices are in retreat – Fastmarkets’ daily SC6 spodumene price fell a further US$5/t to US$1075/t overnight, below the US$1135/t month to date average – PLS and its managing director Dale Henderson have regularly been bullish on the growth outlook for hard rock lithium as EV production globally continues to accelerate.

M&A was thought to be in the company’s cross-hairs early last year when former Macquarie banker John Stanning came on board as its business development chief.

But since PLS has grown more inward-looking, the 2Mtpa proposal the latest example of its efforts to seek growth from its own world class Pilgangoora mine.

Already in the process of ramping up from around 620,000t last year to 1Mtpa by the third quarter of 2025, the still yet to be approved proposal to double production again would ensconce the company further among the top purveyors of lithium raw materials.

It comes at a time of weakness for lithium prices, with spot spodumene concentrate on a benchmark 6% Li2O basis falling from over US$8000/t in early 2023 to US$850/t in January this year.

Pilbara thinks it will generate 1.9Mtpa of 5.2% Li2O con if it approves the expansion, costing $1.2 billion to bring to life. That compares to the roughly $1b and more costs of bringing new 500,000tpa operations into existence, evidenced by Liontown Resources (ASX:LTR) and its Kathleen Valley mine.

The incremental NPV and cashflow after tax on an 8% discount basis sits at $2.6b and 55% respectively.

But two numbers of extreme interest to the broader investment community will be the miner’s long term price assumption. It sees the project working at a long-term SC6 price of US$1500/t, which translates to a 5.2% price of US$1300/t, with payback in three years.

At US$2000/t NPV would rise to $4.3b, with NPV falling to $900m at US$1000/t.

Operating costs would come in at between $550-650/t, though they will be refined in a definitive feasibility study due in December 2025.

Sacrifices to be made

Of course nothing comes without a trade off. The P2000 project would cut mine life from 34 to 23 years, as long as no more economic resources at the project, which contains a 214Mt reserve and 414Mt resource, are identified.

It comes after Pilbara signed new offtake deals with a slew of Chinese customers earlier this year and revealed China’s Ganfeng as its partner in a proposed downstream conversion refinery to be located basically anywhere other than the Middle Kingdom.

It also highlights the shift away from big M&A chatter seen around Pilbara Minerals, which was suggested as a potential buyer of juniors from Azure Minerals to Patriot Battery Metals (ASX:PMT) in the past.

Indeed, the lithium M&A landscape has gotten quieter in general, though some are still staking their claim in the search of new frontiers for the commodity.

Chilean giant SQM, which bought Azure in a joint deal with Gina Rinehart’s Hancock Prospecting, is facing the prospect of ceding over half of its major operation in Chile’s Atacama to State-owned Codelco under a national lithium policy that treads a tightrope between nationalisation and private-public partnerships.

Its latest attempt to lock up resources elsewhere has taken it to far-flung Sweden, where ASX-listed graphite play Talga Resources (ASX:TLG) announced sample results from lithium prospective pegmatites at its Aero project over 50km of strike in August, with one sample grading up to 1.9% Li2O.

SQM will spend a minimum of $1m and up to $19m exploring the project over seven years in a staged process to claim up to 70% of the project.

Talga shares rose 12.3% in morning trade on the news, while the response to the PLS study was more tepid, falling 3.59% amid a broader crunch on lithium stocks following some bearish price forecasts from Wood Mackenzie.

They think rising supply, such as that proposed by PLS, will keep a lid on prices, which will still be US$1000/t out to 2028.

Adjustments to WoodMac’s price forecasts were infamously fingered for bankers’ decisions to pull a $760m funding package for Liontown’s Kathleen Valley early this year.

It later rose $550m in debt facilities but pushed pause on an expansion in mining and processing capacity from 3Mtpa to 4Mtpa in response to the reduced liquidity.

Don’t wanna be an American Idiot

Conspiracy nuts in America, virtually as unchecked as owner Elon Musk on his social media platform X, may have inspired a shock share price run for battered and bruised cobalt miner Jervois Mining (ASX:JRV).

After a ~21% rise this morning the ASX sent a carrier pigeon out with a speeding ticket, to which Jervois said it had no news to report.

EXCEPT that Twitter/X users were blowing up with rumours politicians in US Congress were investing big in Jervois, which online conspiracy theorists claim is NOT SO DISCREETLY behind a bureaucratic decision to halt groundwater rights for some Idaho farmers, a story that has been taken wildly out of context since it broke a couple days ago.

Caught in a post-Trumpian ****storm, Jervois says it has no knowledge of any trading in its shares by US politicians and it was not aware of water rights for the State’s ranchers being impacted by its Idaho Cobalt Operations – which, FYI, were not taken into production last year because cobalt prices stink.

That clarification likely has little sway with these folk though.

#IDAHO #Farmers #Water was shut OFF for mew #Cobalt Plant that used LOTS of water 24/7
How many in Congress have stock in this new Company?? Hmm LOTS@Jervois_Global #Jervois https://t.co/gsHZ43twcE pic.twitter.com/Rubh5IHaBk

— Bird Lover (@BirdLov62991644) June 21, 2024

This serves Bill Gates interests too, putting farmers out of biz so we won’t starve. Ludicrous claims.
You just know Paul Pelosi and other Congressional insider traders did big buys of stock just bf fed approval was issued to Jervois this month.

— True Explorer (@true_explorer) June 19, 2024

On recent history, if Nancy Pelosi had been big in Jervois it wouldn’t have been a savvy bet. Her husband Paul is generally big in The Magnificent Seven, not struggling Aussie explorers. And cobalt is a struggle of a market right now.

Described last year by Macquarie’s nickel expert Jim Lennon as “one of the worst markets he’s ever seen”, its presence in Congolese copper and Indonesian nickel mines makes its supply relatively price agnostic and the battery metal is currently fetching around US$27,000/t on the LME.

That’s down from over US$80,000/t two years ago. In that time shares in $53m capped Jervois have lost a quite extraordinary 97.61% of their value.

Which isn’t to say a revival in the cobalt market, linked to demand for batteries and EVs, couldn’t make JRV look a little brighter. It currently produces cobalt at a refinery in Finland.

Over in the States, JRV received a US$15m Department of Defense grant to support exploration and site selection activities for a refinery which currently wouldn’t be economic to develop without significant US Govt support, having suspended final construction of the Idaho project in February last year.

For reasons of terminology and confusion in the construction of US legislative acts, some of the online combatants think the grant has been expropriated from aid funding for Ukraine – obviously not the case (some of the Department of Defense’s funding to try onshore critical minerals production has been issued under the Additional Ukraine Supplemental Appropriations Act).

Anyway, a man whose bio says his purpose is “Picking fights with commies” is the adult in the room.

Would people please stop with the CRAZY conspiracy theories about the cobalt mine? It makes us look ignorant. The Jervois mine, IF it were active, would draw a small amount from the SALMON River. The water curtailment covers water rights disputes in the SNAKE River Watershed. 🤦

— Ryan Spoon (@SpoonForIdaho) June 21, 2024

With regards to the water curtailment, some sort of agreement seems to have been reached, though we will admit to being slightly out of the loop with the minutiae of Idaho State politics.

Whatever circle of hell Jervois Mining has wound up in, today has at least been a rare good 2024 day for any long-term holders planning to weather the downturn, with its shares closing up 21%.