Pilbara Minerals ( ASX:PLS) has reported record monthly production at its Pilgangoora lithium-tantalum project in Western Australia, but says that it won’t be repeating recent successes due to bottlenecks in developing processing facilities in China.

In May, Pilgangoora produced 22,375 dry metric tonnes of spodumene concentrate, representing around 85 percent of its planned Stage 1 plant capacity, with full capacity projected to be 330,000 tonnes per year (or roughly 27,5000 tonnes per month).

However, Pilbara Minerals’ major offtake customers for Stage 1, China’s General Lithium and Ganfeng Lithium (SZSE:002460), have been taking longer than expected to construct, commission and ramp up new chemical conversion facilities in China.

The delays in General Lithium and Ganfeng Lithium’s work mean that Pilbara needs to limit production to avoid forcing too much lithium through what’s effectively a bottleneck. 

“These delays in the development of new chemical conversion capacity by Pilbara Minerals’ Stage 1 customers has resulted in lower shipped tonnes from the Pilgangoora project during the June quarter, which are currently estimated to be in the range of 23 to 45 kilotonnes shipped, pending the departure dates for the remaining vessel(s) in the month of June,” said the company.

Pilbara Minerals is projecting spodumene concentrate production of between 20,000 and 24,000 tonnes in June. It believes that underlying demand for battery-ready lithium chemicals remains strong.

Production numbers are dependent on a six day shutdown of the concentrator on site, during which the company will perform works to improve recoveries. The shutdown is currently taking place.

A second shutdown will happen in July for more improvement works.

“It is no secret that the spodumene supply market is experiencing some short-term challenges as the big players, including our cornerstone customers, work to commission and ramp-up their chemical conversion plants in China,” said Pilbara Minerals Managing Director and CEO Ken Brinsden.

“We remain confident that the underlying fundamentals of the lithium market remain strong — as evidenced by the growing number of agreements being made by major car manufacturers further down the supply chain in both Chinese and global markets, to shore up lithium supply to meet their long-term (electric vehicle) production and energy storage market targets.”

Brinsden added that his company is receiving plenty of interest from potential offtake partners for the remainder of Stage 1 and Stage 2 output from the Pilgangoora project.

“This gives us confidence that major strategic players in the lithium industry share our view of the transformational opportunity that will continue to develop in the lithium raw materials sector over the next decade,” he explained.

Pilgangoora has been developing at a rapid pace, with its first spodumene concentrate shipped in October last year and its official opening in November.

Pilbara Minerals has also been weighing up the potential for a Stage 3 expansion due to customer demand. Stage 3 would see the project’s production increased dramatically.

Don’t forget to follow us @INN_Resource for real-time updates!

Securities Disclosure: I, Scott Tibballs, hold no direct investment interest in any company mentioned in this article.