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Why the clean energy fund is backing this mining company

Exploration at Pilbara Minerals at its Pilgangoora project

The Pilbara region of Western Australia, long synonymous with iron ore, is fast becoming known for housing one of the world’s biggest lithium ore deposits.

In its first foray into the mining sector, the federal government-backed Clean Energy Finance Corporation (CEFC) has committed $20 million to become the cornerstone investor in Pilbara Minerals (ASX:PLS) to fund the development of its Pilgangoora lithium-tantalum project.

Founded by the Gillard government in 2012, the CEFC helps finance commercially viable clean power technologies such as solar and wind.

“Lithium is an essential part of the clean energy transition, particularly as we develop enhanced battery storage technologies that will allow us to increase the use of renewable energy, both for large-scale and small-scale projects,” said CEFC CEO Ian Learmonth.

“Worldwide demand for lithium is growing, driven by the increasing uptake of electric vehicles that use lithium ion batteries, and by the growth in energy storage solutions requiring lithium supplies.

“The lithium concentrate supplies to be produced by this project will help build Australia’s capacity to supply much needed resources to clean energy technologies that are set to play a vital role in increasing the use of renewables in our future energy mix,” he added.

Lithium in the Pilbara

The Pilgangoora project, located 120km from Port Hedland, is regarded as one of the biggest new lithium ore deposits in the world, with a globally significant hard rock spodumene resource. Spodumene is a source of high purity lithium.

The latest Mineral Resource update comprises a Measured, Indicated and Inferred Resource of 128.6 million tonnes grading 1.22% Li2O (spodumene) and 138ppm Ta2O(tantalum) containing 1.57 million tonnes of lithium oxide and 39 million pounds of Ta2O5.

“Pilgangoora is a world-scale project which will help underpin the establishment of an important new export industry in the Pilbara, delivering strategic metals which are an essential part of the supply chain for the global battery market which is currently undergoing transformational growth,” said Pilbara Minerals CEO Ken Brinsden.

Mine construction is anticipated to generate 300 jobs. Production is expected to start in the first quarter of 2018.

“Concentrate will be exported from Port Hedland, predominantly to China under existing off-take agreements for processing into lithium carbonate and lithium hydroxide for a wide range of lithium products,” Mr Brinsden said.

Pilbara Minerals has already confirmed long-term deals with Chinese companies Ganfeng Lithium and General Lithium for the majority of mine’s expected output of 2 million tonnes per annum of processed ore.

In late July, the company awarded several key contracts including stage two plant construction, bulk civil earthworks, camp expansion and camp services.

PLS shares have traded between 31c and 60c over the past year, closing at 39c on August 4.

The company spent $32.75 million in the most recent quarter, leaving it with $87.25 million in cash and equivalents at June 30. It expects to spend $40.9 million in the current quarter.

What is Lithium?

Lithium (periodic symbol Li) is a light, reactive metal found in salt deposits in Australia, South America and China. It is central to the production of lithium-ion batteries used in smartphones and electric vehicles (EVs).

Demand for lithium is surging on the back of the EV market which has boosted the share prices of lithium miner and explorers.

 

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.

Categories: Resources