Undeterred by a recent slide in lithium prices, Pilbara promised on Wednesday to expand supply from its Western Australia mines by 40 per cent within three years.
The spending on internal growth makes it less likely that it will mount a rival bid for pre-revenue Liontown, which had a market capitalisation of $5.63 billion on Wednesday and requires further funding to build its Kathleen Valley mine.
Asked about the chances of Pilbara lobbing a rival bid for Liontown, Mr Henderson said it was “definitely the case that priorities are looking inwards” for growth.
“This is the fastest route to create more value for our shareholders, we have got the benefit of this enormous resource, we should expand it as rapidly as we can,” he said of the expansion plan.
Mr Henderson said growth through acquisitions was a much lower priority, behind investment in existing mines and in downstream processing plants, such as the one it is building in Korea with POSCO.
Pilbara sells spodumene concentrate with just under 6 per cent lithium content, and sold a small batch at auction in November for the equivalent of $US8575 a tonne.
RBC reported on March 28 that the same commodity had fetched closer to $US5100 a tonne in recent weeks, based on a blended average of different price reporting agencies.
A price above $US5000 a tonne is still extremely high in comparison with the $US400 a tonne the same commodity was fetching in late 2020, but RBC analysts expect the spodumene price to continue to fall.
It is tipped to halve by 2026 and settle at a long-term price of $US1250 a tonne by the end of this decade.
But Mr Henderson said demand from customers remained strong even as prices were softening. “All of them are wanting more product even though pricing has come off a bit,” he said.
“The long term structural deficit is what we are going to see unfold, the Albemarle and Liontown announcement yesterday I think is a signal that they [Albemarle] think that way as well, and is a really positive signal.”
Wednesday’s investment will expand Pilbara’s annual output to 1 million tonnes of spodumene concentrate per year; up from just over 600,000 tonnes in the year to June.
The company hopes to be producing at a rate of 1 million tonnes per year by September 30, 2025.
RBC had expected the expansion to 1 million tonnes a year to cost Pilbara $750 million, and the lower-than-expected cost helped drive a 2.3 per cent rise in Pilbara shares on Wednesday.
The stock has risen almost 15 per cent over the past two trading sessions, with the surge mostly driven by the sentiment boost that the entire lithium sector received when Albemarle’s bid for Liontown became known on Tuesday.
Ausbil Global Resources portfolio manager James Stewart said incumbent lithium producers such as Pilbara and Allkem looked cheap in comparison to the $5.5 billion valuation that Albemarle had put on pre-revenue Liontown.
“It [Albemarle’s offer] does look a little bit expensive versus things like a Pilbara or an Allkem, so on a relative basis, it looks a little bit expensive given the development stage,” he said in reference to the fact that Liontown’s Kathleen Valley mine is not yet built.
Former Afterpay chief financial officer Luke Bortoli will join Pilbara as its new chief financial officer.
