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Here’s why the Pilbara Minerals (ASX:PLS) share price is dropping today

The Pilbara Minerals Ltd (ASX: PLS) share price is dropping lower today following the release of its half year results…
The post Here’s why the Pilbara Minerals (ASX:PLS) share price is dropping today appeared first on The Motley Fool Australia. –

red arrow pointing down, falling share price

The Pilbara Minerals Ltd (ASX: PLS) share price is trading lower in late trade following the release of its half year results.

At the time of writing, the lithium miner’s shares are down 3% to $1.05.

Despite this decline, the Pilbara Minerals share price is still up a whopping 235% over the last six months.

How did Pilbara Minerals perform in the first half?

For the six months ended 31 December, Pilbara Minerals reported a 56.5% increase in revenue to $59.1 million. This was driven by a 114% increase in spodumene concentrate shipments to 114,239 dry metric tonnes (dmt).

The reason the 114% increase in shipments didn’t translate into a similar increase in revenue was pricing weakness.

Management explained: “Whilst there was an improvement in sales volumes, customer pricing remained weak during the half-year across the entire lithium raw materials and chemical supply chain.”

Positively, towards the end of the December quarter and into January 2021, there was evidence of a material lift in lithium chemicals pricing within China. The company notes that the Platts China Domestic Battery Grade lithium carbonate price increased by over 60% from the lows in August 2020.

But that wasn’t enough to stop the company from posting a material loss during the first half. Pilbara Minerals reported a statutory net loss after tax of $21.2 million for the half.

This left it with a cash balance of $248 million at the end of the period. Though, a good portion of these funds has now been used to acquire the Altura Lithium Operations. That acquisition completed in January.

Management commentary

Pilbara Minerals’ Managing Director, Ken Brinsden, was pleased with the company’s performance during a challenging period.

He said: “I am extremely pleased with our performance during what was a challenging period for Pilbara Minerals and the entire lithium sector. We have worked hard, done what we said we would do and, with the entire lithium raw materials supply chain now rebounding quickly, we are prepared for the opportunities in front of us.”

“Our plant is performing well, we have driven down our operating costs and we now have expanded production capacity following the acquisition of the Altura Project. At full capacity this acquisition makes us the largest, independent hard-rock lithium producer in the world and a more resilient and flexible operation – with open offtake in a market that is improving day-by-day. What a great position to be in!”

Outlook

Mr Brinsden appears positive on the company’s outlook thanks to improving lithium prices.

He explained: “Lithium raw material markets are now clearly in an upward trend as it relates to both demand and price, which is now translating to improved spodumene pricing. Further, we are fielding more supply enquiries by the day, implying Pilbara Minerals is well-placed with both low-cost operations and near-term expansion capacity to capitalise on this part of the cycle.”

“Our plan over the next four to six months is to complete a comprehensive evaluation of the Altura Project to inform both our integration strategy and future operating strategy, with the aim of optimising the integration of the two operations and increasing production, while maintaining a strong balance sheet,” he added.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Here’s why the Pilbara Minerals (ASX:PLS) share price is dropping today appeared first on The Motley Fool Australia.

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