Pilbara Ends Pilgangoora Partnering Process, Moves Forward with POSCO JV

Despite receiving many proposals and significant interest, Australian lithium miner Pilbara Minerals (ASX:PLS,OTC Pink:PILBF) has decided to close the partnering process for its Pilgangoora lithium-tantalum project in Western Australia.

The Perth-based company said the offers received for a stake in the project don’t represent an appropriate valuation for Pilgangoora. Pilbara had been looking to sell a 20 to 49 percent interest in the project since March.

“We do not believe it is in shareholders’ best interests to sell part of the project at this time, effectively giving an incoming party access to mine-level equity and long-term, low-cost spodumene-tantalite supply at a substantial discount,” Pilbara Minerals Managing Director and CEO Ken Brinsden said in a statement.

The company believes Pilgangoora remains one of the premier hard rock lithium projects globally, as measured by expected cost position, the size of the operation and exploration potential.

“While demand for spodumene concentrate is currently depressed as the Asian lithium chemicals plants work through their commissioning processes, we believe the long-term outlook and fundamentals for lithium remain very strong, underpinned by the global themes of electrification and energy storage,” Brinsden said.

In addition, Pilbara cut its sales guidance for the September 2019 quarter to 20,000 to 35,000 dry metric tonnes (dmt) of spodumene concentrate, down from 35,000 to 48,000 dmt. However, sales guidance for the December 2019 quarter remains unchanged at 65,000 to 80,000 dmt.

Looking ahead, the company will now focus on optimizing the current Stage 1 operation and advancing the Stage 2 expansion, which will see the asset reach a run-of-mine ore production and processing capacity of 5 million tonnes per year.

The lithium miner is aiming to complete a feasibility study for Stage 2 in December 2019, with a final decision to be made in early 2020.

Pilbara is also working on a proposed lithium hydroxide conversion facility with POSCO (NYSE:PKX), announcing on Tuesday (August 27) that it has reached a binding agreement to form a joint venture (JV) with the South Korean company.

“The joint venture will give Pilbara Minerals significant exposure to one of the world’s most dynamic and fastest growing markets for lithium chemicals,” Brinsden said. “Supply to the proposed South Korean chemical plant will also have the benefit of further diversifying our spodumene concentrate sales arrangements over time.”

Pilbara Minerals will initially hold a 21 percent interest in the JV, with an option to increase it to 30 percent. The initial 21 percent investment will be largely funded through a previously announced AU$79 million convertible bond agreement with POSCO. Additionally, an existing offtake deal for spodumene concentrate will be assigned to the joint venture.

On Tuesday, shares of Pilbara Minerals closed down 2.74 percent in Sydney at AU$0.35.

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