The Pilbara Minerals Ltd (ASX: PLS) share price dropped by 10% today after providing a business update.
Pilbara Minerals is an Australian lithium producer with its 100%-owned Pilgangoora Lithium-Tantalum Project. The Pilgangoora project is located in West Australia and is one of the largest lithium ore deposits in the world. With this asset, Pilbara Minerals plans to become one of the world’s largest producers by 2020.
Why The Pilbara Share Price Fell 10%
Pilbara gave a Pilgangoora production and sales update for May 2019.
The lithium business said it achieved record production of 22,375 dry metric tonnes of spodumene concentrate during May, which represented 85% of the planned Stage 1 plant capacity.
However, the company said that while demand for battery-ready lithium chemicals remains strong, delays in the construction, commissioning and building of Pilbara Minerals’ offtake customer chemical conversion capacity in China has resulted in June quarter sales being “constrained.”
Pilbara is working on this delay by working with its customers and arranging sales to other customers.
Due to all of the above, production at Pilgangoora will be “moderated” during June and July, it will use this time to work on defects and plant improvement works.
Pilbara also said that the previously announced partnering process is well progressed, with the high level of interest received showing that there seems to be medium and longer term demand for its lithium.
The due diligence between Pilbara and POSCO has been completed, with the final downstream joint venture and technology licensing terms likely to be agreed by the end of the month, June 2019. A final decision is expected by the end of the September 2019 quarter.
Due to the trading conditions of lithium raw materials in China, spodumene concentrate pricing has continued to soften and is in range range of US$600 to US$640 per dry metic tonne.
Is The Pilbara Share Price A Buy?
This update shows that in the shorter term, resource businesses can face difficult conditions even if they have expected positive long term demand growth. That’s why I prefer the idea of the exciting ASX growth shares in the free report below.
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