• Home-grown lithium success story Pilbara Minerals rakes in full year profit of $561.8m on the back of crazy demand for spodumene
  • Pilbara Minerals is poised to supply product into a burgeoning growth market, one that will be in deficit for the next decade (at least)
  • Who is the next profitable mid to large cap producer? 


It is a great time to be in the lithium space right now with demand growth widely predicted to outpace supply through to 2030.

Strong lithium prices continue to deliver enviable earnings and cashflow for lithium producers – you don’t need to look much further than homegrown success story Pilbara Minerals (ASX:PLS) for an example of how this is playing out.

The company raked in a maiden full year profit of $561.8m (following last year’s $51.4m loss) on the back of manic demand for Aussie spodumene, which saw prices surge to an average of $US2,382/t in FY22.

PLS announced a gross margin of $853.5m from the sale of 361,035t, up from just $46.2m in FY21 (281,440t) and $11.9m (116,256t) in FY20.

Spot prices are even higher again, with PLS’s latest Battery Materials Exchange auction pulling in US$6,350/t for a 5.5% Li2O spodumene concentrate.

This profit result was driven by a strong operating performance at the company’s Pilgangoora Lithium-Tantalum Operation in Western Australia’s Pilbara region, which hosts the Ngungaju Plant that is now progressing towards name-plate production capacity of ~180,000-200,000tpa during the September quarter.

Providing lithium maintains its battery metal No.1 status, the sector is not likely to slow down anytime soon, albeit it’s not immune to volatility as we’ve seen in the past.

But the long-term outlook is almost certainly overwhelmingly positive (sorry Goldman) especially given its leverage to one of the fastest growing markets in the world, electric vehicles, and all the different possibilities of lithium batteries in the future.

With Pilbara Minerals poised to supply product into a burgeoning growth market, which it believes will likely experience a deficit of about 18 Pilgangooras through to 2040, the question is, who is the next profitable mid to large cap producer?

If it was that easy to predict the next big thing in lithium, we wouldn’t be writing this article, and you wouldn’t be reading it.

That’s why we’ve tapped the brains of experts in the field to see which companies, they believe at the very least, stand a good chance.


Top picks

John So, VP Capital co-founder

The electric vehicle demand is a lot stronger than what is expected and currently the only thing holding it back is supply constraints from factory components and semiconductors for microchips, So says.

“One of the biggest issues in the industry is that no one believes the current prices are sustainable because obviously they’ve come up a long way in a little less than 18 months.

“Forecasters who expected lithium prices to come down have now come out and revised their numbers and more or less expect not much of a change in lithium prices for the next two years.

“Of course, it is very hard to forecast beyond that and a lot of them expect prices to come down as lithium supply comes on, but they have missed the mark in the last 12 months so I wouldn’t be surprised that high prices become a new norm. 

“I think the Australian lithium industry has potential to become as big as the coal market if lithium prices continue to hold.”



Targeting first production in 2024, the next ASX company set to begin construction is Liontown at its Kathleen Valley Lithium mine north of Leinster in WA’s Goldfields.

“Liontown have the potential to become a Pilbara Minerals-level producer and the reason for that is because the project has sufficient scale to produce, on a per annum basis, more than what PLS is actually producing at the moment,” So says.

“Pilbara Minerals produces around 350,000 to 400,000 tonnes of spodumene, and they can expand that by spending a bit of money but putting the expansion aside Liontown is actually targeting a 500,000t operation which is around 20% more than PLS’s WA assets.

“The project is very advanced and well-funded which is very important for projects like this because it often costs in excess of half a billion dollars to get a project like this off the ground.”

From a jurisdictional perspective, So says Kathleen Valley has all the benefits of corporate governance, consistency, and transparency with mining laws in a country like Australia.

And while the difficulty with good projects in good jurisdictions comes down to the funding, Liontown has secured deals with major downstream partners including South Korea’s LG Group, Tesla and Ford.

“Analysts who expect lithium prices to fall off a cliff underestimate how quickly this electric vehicle market is going to accelerate and how difficult it is to bring mines into the market.

“Even if prices halved, I think LTR can turn its market cap over in three years.

“If you are able to purchase an upstream asset with a long mine life and payback period of less than three years then I think the company is probably very undervalued.”



While LTR is the next company to begin construction, CXO is the next ASX company to begin production at its Finniss Lithium Project in the Northern Territory before the end of 2022.

“CXO’s share price has done very well since the market bottom and has actually outperformed most of the in-vogue sectors such as tech even in this recovery,” So explains.

“Part of the reason for that is because the project is very much de-risked – it’s at the end of its construction program and is about to start producing and take advantage of these very high lithium prices.

“Again, CXO’s mine is in Australia – people understand spodumene mining from WA because various companies do it, including your ASX lithium majors – IGO, MIN, PLS, AKE and now CXO will be the fifth who joins them on the ASX.”

In its current shape, So says Core Lithium doesn’t have the chance to get as large as Pilbara Minerals yet due to its current reserves.

“They don’t support a mining operation that is anywhere near as big as what Pilgangoora is but that said, Core Lithium does have a lot of exploration acreage yet to be tapped.

“They have been putting out new drill targets in previously less explored areas that they own and getting some very interesting hits.

“Once they get the cashflow in, they will be able to recycle a little bit of it back into exploration so while it’s certainly something that could happen, it’s not immediately on the horizon like LTR in terms of getting to PLS’s scale.”



Leo Lithium was spun out of Firefinch’s Goulamina Lithium Project in Mali which will be West Africa’s first spodumene producer once it comes online in 2024.

Backed by Gangfeng, one of the world’s largest lithium manufacturers, So says LLL is holding cash reserves close to $100 million, which takes it to more than half of the $500 or $600 million in capital expenditure needed to bring the project online.

“The balance of the money is going to come from debt arranged by Gangfeng and while it is in a different jurisdiction to CXO, the whole world including China is looking to secure lithium supply.

“I would be surprised if Gangfeng doesn’t come up with or procure the rest of the debt arrangement and once that is done, I believe Leo Lithium will be in a position to start construction within the next 12 months basically.”

In terms of scale, So believes Goulamina resembles a bit more of PLS’s WA asset in that its operations are not too dissimilar once production kicks off.

“At a very undemanding valuation of around less than 5% of PLS’s market cap and less than 15% of LTR’s and CXO’s market cap, it is certainly something to look at,” he says.


Reg Spencer, Canaccord Genuity mining analyst

In terms of production scale, Spencer says the standout stocks most similar to Pilbara Minerals are Leo Lithium and Liontown, although they are both around two years away from first production.

The next tier down, and the closest to production, would then be Piedmont Lithium and Core Lithium, he adds.

“Don’t forget about Allkem – it will be a global top 5 lithium chemical producer (as opposed to PLS, LLL, and LTR whom only produce concentrate) by 2025.”



“Goulamina is one of the world’s largest hard rock lithium resources totalling 109 million tonnes at 1.45% Li2O and is ranked number eight globally,” Spencer explains.

The company updated its DFS in late 2021 outlining a 20-year, ~800ktpa staged developed spodumene project with low cash costs and capital intensity with stage-1 capex at US$255m.

“Construction is scheduled to begin in mid-2022 and once in production, we estimate Goulamina can generate annual EBITDA of US$380m over years 1-4, increasing to US$500m once the stage-2 expansion is completed from 2026,” he says.

Ganfeng’s US$130m equity earn-in and US$40m project loan sees the project mostly funded, Spencer adds.

“We expect any funding shortfall to be adequately covered by the JV partners and potential extension of Ganfeng loan/third party debt.”



“LTR recently announced an FID for its 500-800ktpa Kathleen Valley project, following the finalisation of its off-take agreements with LG Energy Solutions, Tesla, and Ford covering 90% of stage 1 production.

“The secured loan facility now sees the project fully funded (cash reserves of ~A$460m), with LTR recently updating project capex to A$545m (vs 2021 DFS estimate of A$473m),” Spencer explains.

“We look to exploration results at Buldania (LTR’s other project in WA), further studies on downstream conversion and updates on construction/development progress as the next potential catalysts.”



PLL and Sayona Mining (ASX:SYA) are restarting the North American Lithium (NAL) operation in Quebec which is on track to reach first production in Q1, 2023.

The two companies recently announced a financial investment decision for NAL with restart capex estimated at C$91m.

“The project is expected to produce 160ktpa SC6, with PLL’s off-take rights covering greater of 50% of output or 113ktpa at a ceiling price of US$900/t (vs ‘spot’ prices of ~US$5,000/t),” Spencer says.

“As such, the sale of NAL concentrate under the off-take could see material pre-tax cash flow for PLL in 2023 of US$106m up to US$206m at ‘spot’ prices.”

PLL had cash of US$140m as at June 2022.



Core is progressing its Finniss Lithium project in Northern Territory to commissioning phase in the second half of 2022.

“We sit 30% higher than CXO estimates and factor no revenue until the March quarter as a matter of conservatism, we also assume commercial production is only achieved in June quarter of 2023,” Spencer says.

“We have updated our model for prices and costs leading to a 50% increase in our net asset value for Finniss.

“However, we have reduced our EBITDA multiple from 12 to 7.5 and increased our discount rate to 10% (previously 8%).

“We have also risked the asset at 90% on account of it coming into the final stretch of construction (a higher risk period).”



Spencer says AKE has the most diversified asset base out of all its peer group.

The company has both lithium brine in South America and spodumene production in Australia.

“It’s got the greatest growth outlook such that by 2025/26 we see the company has the potential to be a global, top five lithium chemical producer and there are not many other companies that we know of looking to achieve that.

“If you look at their large North American listed peers that are producing 80–100,000 tonnes of lithium chemicals capped at $15-20 billion, that gives you an idea of the market opportunity over the next five years.”


The views, information, or opinions expressed in the interviews in this article are solely those of the interviewee and do not represent the views of Stockhead.

Stockhead does not provide, endorse or otherwise assume responsibility for any financial product advice contained in this article.