Pilgangoora Sees Stage 2 Green Light with Funding Package

Pilbara Minerals (ASX:PLS) is weighing the potential of a stage 3 expansion to its Pilgangoora lithium-tantalum project in Western Australia with two of its key customers now supporting a proposed funding package for stage 2’s expansion.

The funding package is set to comprise a AU$35.5 million offtake prepayment facility from Great Wall Motor Company (HKG:2333) and a AU$50 million equity placement to Ganfeng Lithium (SZSE:002460).

Each company’s contribution satisfies their respective funding commitments for stage 2 and, in combination with the company’s existing cash reserves and future cash flow, would fully fund the expansion. Both companies currently have offtake agreements with Pilbara for product from Pilgangoora.

“We’re out of the blocks early in the New Year with the announcement of a funding package which once completed should ensure that our next major growth step, to 5 [million tonnes per year], is fully-funded,” Pilbara Minerals managing director and CEO Ken Brinsden said in a statement.

“Upon completion of the expansion by the March quarter of 2020, Pilgangoora will be elevated to an annualised production rate of up to 850,000 [tonnes per year] of spodumene concentrate, putting us firmly on track to become one of the world’s major global lithium raw material producers.”

The company is currently ramping up production at the project where stage 1 operations are ongoing, with Pilgangoora having produced approximately 23,500 dry metric tonnes of spodumene concentrate in December 2018. Last month’s results are equivalent to around 85 percent of the plant’s stage 1 design capacity.

While stage 2 would see Pilgangoora’s production grow to 5Mtpa, the possibility of a stage 3 expansion would push that number to “at least” 6.2Mtpa with the potential to reach 7.5Mtpa, according to Brinsden. As such, stage 2 will be engineered and built to accommodate a potential stage 3 expansion.

According to Pilbara, it is unlikely that a stage 3 expansion would be commissioned any earlier than 2021.

Alongside the funding package news from Pilbara came the signing of a non-binding memorandum of understanding (MoU) with offtake partner POSCO (NYSE:PKX). The MoU proposes a larger joint-venture (JV) chemical conversion facility in South Korea with a 40,000 tonnes per year (tpa) lithium carbonate equivalent (LCE) capacity versus the originally planned 30,000 tpa LCE.

While POSCO’s current spodumene concentrate offtake agreement for Pilgangoora sits at 240,000 tpa, the MoU would see that number grow to 315,000 tpa to support the bigger facility.

Pilbara’s stock price jumped 16 percent by the end of ASX trading on Thursday (January 3), closing the day at AU$0.725 per share.

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Securities Disclosure: I, Olivia Da Silva, hold no direct investment interest in any company mentioned in this article.