“Pricing is continuing to trend up,” he said as he handed down Pilbara’s inaugural profit, adding this was in both contracted prices for lithium-rich spodumene and via the company’s new “battery material exchange” spot market auction.
“My sense is people would have their socks blown off in respect of the pricing you could achieve.
“It’s a function of there just being a critical shortage of lithium raw materials and … we represent … growth … but we’re also demonstrating how hard it is to bring that supply on and especially if it has to be brought on quickly.
“I would suggest that’s probably going to be reflected in many, many years of work from here for the industry to catch up, ie supply meeting demand.”
The comments came as record prices helped boosted Pilbara Minerals’ net profit for the six months to December 31 to $114 million, its first bottom-line result in the black and a big turnaround from a loss in the previous corresponding half. Underlying profit came in at $84.2 million.
The result was overshadowed by Mr Brinsden’s planned departure later this year, which he said was driven by the desire to “take a break” after six years running Pilbara Minerals and three before that as CEO of Atlas Iron. The 50-year-old mining engineer said his health was good, and he wasn’t “about to keel over”, but after 10 years running listed companies during some challenging times – and it being a good time for Pilbara Minerals to attract a new CEO – he was ready to step down.
“There’s never a good time, there’s never a bad time, it’s just constantly changing,” Mr Brinsden, who owns around eight million Pilbara Minerals shares plus options, told The Australian Financial Review. “Does that mean it’s the top (of the market), who knows, but I am optimistic about Pilbara Minerals’ position.”
Chairman Tony Kiernan said Mr Brinsden had grown its key Pilgangoora operations from an idea back in 2014, when it got going, into an S&P/ASX 100 company, and steered it through a “pivotal” debt refinancing in 2020 after the slump in lithium prices and the acquisition of the neighbouring Altura operation.
The debt deal was preceded by a key equity raising in 2019 at 30c a share to recapitalise – a period Mr Brinsden said had taken its toll. Its shares on Wednesday rose 2.2 per cent to $2.85.
“We weren’t feeling comfortable, I can assure you of that,” he said. “The nature of the industry at that time was that it was – and arguably to a point still is – immature. And some of our peers didn’t make it.
“(So) being honest, it has been taxing being involved in the Pilbara Minerals growth story because it hasn’t been a smooth ride.”
In the company’s investor call, Regal Funds Management head of mining Tim Elliott credited Mr Brinsden for delivering “exceptional” returns to shareholders by focusing on value over volume, doing counter-cyclical and synergistic M&A – which he said was “all too rare” in the industry – and launching the battery exchange platform.
“I hope the rest of the mining industry has paid attention,” he said.
Still, Macquarie analysts said the company’s first-half results were weaker than expected following higher exploration and finance costs.
After shipping 170,228 dry metric tonnes of spodumene concentrate in the first half, up 49 per cent, Pilbara Minerals removed full-year guidance for shipments amid uncertainty around accessing vessels, but flagged 340,000-380,000 tonnes of production.
Like other miners battling higher labour costs, it also lifted second-half cost expectations from its key Pilgan operation to $450-$490 a tonne free on board excluding royalties.
But higher prices are largely offsetting the cost headwinds, with the company achieving an average selling price of about $US1250 per tonne in the December half, boosting sales revenue to a record $291.7 million.
Since the end of the half, spot spodumene concentrate prices have jumped further to $US3750-4500 a tonne.
Asked about pricing ahead, Mr Brinsden said, “it feels to me like everybody is underestimating the effect of the price trend” because the spike in lithium chemical prices is a key driver of the company’s off take contracts “and I can assure you it is much higher today”.
“In fact, it’s not that dissimilar to what people are currently reporting as spot pricing because the chemicals price is running so hard, so, yeah, the trend is very strong, in which case I think it’s being under-called,” he said.
“God knows what you would receive if you ran an auction today because the value in the spodumene contributing to a $US70,000 chemicals price is enormous.
“If people are contracted in the supply chain they have to buy, it doesn’t matter what the price is, and as a result it feels like pricing is going to be very, very strong.”
