Why This Lithium Miner Doubles Its Supply Amid Price Plunge

A meltdown in some of the most-hyped energy-transition metals is wreaking havoc across the mining industry, stalling projects, scuppering deals and triggering a scramble for cash that promises to reverberate through the industry for years.

Lithium, a crucial component for electric vehicle (EV) batteries, has seen its value plummet by over 80% since its peak in late 2022. The market has rapidly shifted from fears of scarcity to an overwhelming surplus. Consequently, the share prices of key lithium companies continue to fall in 2024.

The depressed lithium prices are posing challenges for mining companies attempting to secure funding through conventional financial avenues, especially during a time when rampant inflation is inflating the costs of initiating new projects.

Looking at the specifics for the upcoming years:

● 2024: Supply an additional 150,000 tonnes of spodumene concentrate

● 2025: Supply an additional 100,000 tonnes of spodumene concentrate (plus an option to increase to 150,000)

● 2026: Supply an additional 100,000 tonnes of spodumene concentrate (plus an option to increase to 150,000)

Pilbara Minerals Managing Director and CEO Dale Henderson stated this increase demonstrates the demand for Pilbara Minerals' spodumene concentrate while preserving optionality for the Company as they assess long-term downstream opportunities in-line with their growth strategy.

Dwayne Sparkes, a lithium industry commentator, offers a unique viewpoint:

Chinese lithium product manufacturers are keeping lithium prices low through the use of inferior domestic sources to gain time to invest in high-grade lithium resources abroad and to strengthen their purchasing power for more affordable materials like spodumene concentrate. This strategy is currently in action as they secure significant quantities of spodumene concentrate.

It's worth recalling the previous cycle lithium underwent. In November 2017, China's EV subsidies drove up the demand for battery-grade lithium carbonate, causing a spike in prices. The subsequent overzealous response from spodumene producers, especially in Australia, led to a market crash between 2018 and 2020.

Many new mining ventures were put on hold, expansion plans were postponed, and explorers redirected their efforts, resulting in a depleted pipeline for new projects. The demand soared once again and the industry finds itself ill-equipped to meet the burgeoning needs, prompting a sharp rally in lithium prices since 2021.

Tom Price, head of commodities strategy at Liberum Capital, asserts that the lithium market is not immune to the typical cycles of commodities: a price collapse leads to reduced projects and supply cuts. Price advises investors to look for signs of market rebalancing among global lithium miners before considering investments in this sector.