Monsters of Rock: Why Pilbara Minerals is still looking for its perfect bride

• Pilbara Minerals looks like it could remain on the sidelines of lithium consolidation spree
• MD Dale Henderson said it remained a distant fourth growth pillar behind a string of organic options
• Materials up a barely perceptible 0.04% as Friday closes the week

Look all over the lithium scene and most everyone’s gone baby crazy.

Allkem (ASX:AKE) is trying to do the deed with US lithium producer Livent, Mineral Resources (ASX:MIN) is spreading its seed far and wide with stakes in most of the resource-level lithium juniors in WA and its $260m for the Bald Hall lithium mine just saw another project fall into Chris Ellison’s hands.

Gina Rinehart’s Hancock Prospecting is on the prowl while international majors SQM and Albemarle have both dipped their toes in the water and even Rio Tinto (ASX:RIO) is trying to get in on the ground floor with farm-in exploration deals.

Sitting on the sidelines waiting for its perfect match though is Pilbara Minerals (ASX:PLS), which while the subject of rumours of interest in Azure Minerals (ASX:AZS) and Canada’s Patriot Battery Metals (ASX:PMT) has proven less than enthused about the bedazzled maidens thrown in MD Dale Henderson’s path.

Hosting its AGM at the University of Western Australia on Thursday, Henderson again told investors inorganic growth was a distant fourth in its list of expansion priorities, behind drilling and extending its own Pilgangoora lithium mine in the Pilbara and pursuing downstream opportunities.

That is despite the appointment earlier this year of former Macquarie banker John Stanning as its chief development officer, news which no doubt had investment bankers sniffing around the cashed up lithium behemoth ($3 billion in the bank at September 30 TVYM) on the lookout for fees.

“What I’m at pains to reassure shareholders is we’re in no rush around inorganic growth. But that being said, if the right thing comes along, Pilbara of course likes the idea of creating more value for our shareholders but we won’t grow for growth’s sake, it needs to be the right proposition,” Henderson said.

“And we’ve got John Stanning employed and his team … are building out the muscle in the business.”

Where is the market headed?

Those growth plans are centred around the expansion of the more than 400Mt Pilgangoora’s production profile to 680,000tpa late next year and 1Mtpa from late 2025.

That will be accompanied, likely, by another downstream initiative through a strategic partnering process to place 300,000tpa of spodumene concentrate from the 1Mtpa expansion with a cornerstone customer.

Henderson said that deal, based on a process expected to wrap up in the March quarter next year, could take a similar form to its arrangement with South Korea’s POSCO. POSCO is commissioning a 43,000tpa lithium hydroxide plant in Gwangyang in its home country in which PLS has an initial 18% stake.

It can exercise an option later to take its share to 30%.

But there are question marks over the short term outlook for lithium with a rapid expansion of upstream production being met by contracting EV sales growth rates in China.

The European and North American carmakers shifting production lines from internal combustion engine cars to electric vehicles are also experiencing what Henderson described as ‘growing pains’.

But he said market participants in China, the world’s key processing and pricing market, remain bullish on the long-term outlook for lithium and EVs and supportive of Pilbara expanding its output.

Spodumene prices have fallen from over US$8000/t in late 2022 to US$1590/t today, with chemical prices also sliding more than three-quarters in 2023.

“We took a visit to China only three weeks ago and caught up with all of our customers and the reason I mentioned that is nobody’s better placed to have visibility on the landscape of the evolving market than the chemical converters and the participants of the industry whom are in the main resided in China,” Henderson said.

“So we had a full week there, did a round robin around all of those customers and queried them on where do they see the market heading both long-term, short-term and what is their conviction or worries in the space?

“Now the really pleasing feedback from this is they remain foot down around the long-term proposition for the market. All of the customers we met in different forms have continued to expand.

“All of the customers we’ve met with continued to ask Pilbara about collaborating further, providing more production and they all remain resolute on the long-term opportunity for the market.”

While lithium prices are down there’s no shortage of interest in lithium stocks as an investment product.

Kali Metals, a spinoff of gold stocks Karora Resources and Kalamazoo Resources’ (ASX:KZR) lithium rights recently finished a $15m IPO raise oversubscribed, while De Grey Mining (ASX:DEG) could look to do the same with the lithium prospects near its 10Moz plus Hemi gold mine.

And how did the materials space end up?

The materials sector started the day with a hint of promise before settling in for a barely noticeable 0.04% rise.

Energy stocks, led by the big coal miners, were more buoyant, up 1.27%.

Gold producers had a rough day, but the bulk of the major iron ore, lithium and uranium stocks closed the week in the green, with materials up over 6% for the past month.

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