The Pilbara Minerals Ltd (ASX: PLS) share price has dropped 2% after the ASX lithium share expanded its lithium sale agreement.
Pilbara Minerals is one of the largest lithium miners with its Pilgangoora operations.
Offtake agreement
It has signed an agreement amendment with Ganfeng Lithium Group which delivers a significant increase in short-term and medium-term supply of spodumene concentrate (raw lithium) to one of the world’s leading lithium chemical converters.
Under the existing agreement with Ganfeng, which was signed in 2017, Pilbara Minerals supplies 160,000 tonnes per annum of spodumene concentrate from Pilgangoora.
In the amended deal, the total allocation is 310,000 tonnes per annum of spodumene concentrate over 2024, 2025 and 2026.
In 2024, the ASX lithium share will supply an additional 150,000 tonnes, taking the total in 2024 to 310,000.
In 2025, Pilbara Minerals will supply an extra 100,000 tonnes (with an option to increase to 150,000 tonnes, at Pilbara Minerals’ discretion), taking the supply to between 260,000 tonnes to 310,000 tonnes.
In 2026, Pilbara Minerals is also going to supply an extra 100,000 tonnes, with an option to increase this to 150,000 tonnes (at the ASX lithium share’s discretion), taking the total to 260,000 tonnes to 310,000 tonnes.
Just like the current agreement, all sales of spodumene concentrate/lithium volumes will be based on the prevailing market price.
The company said this increased supply to Ganfeng is separate to the company’s strategic partnership process which “continues to be progressed in parallel”. The process remains on track and is targeting “conclusion in the line March quarter 2024.”
Is the outlook promising for the Pilbara Minerals share price?
The Pilbara Minerals’ Managing Director and CEO Dale Henderson said:
The long-term outlook for the industry remains incredibly exciting. Both Ganfeng and Pilbara Minerals remain focused on extending our respective positions as major, low-cost producers in the burgeoning lithium market. We look forward to further collaboration with Ganfeng and many more successful years working together.
I think Pilbara Minerals is one of the best ASX lithium shares with its profitable operations, strong balance sheet and a focus on growing its exposure to various parts of the lithium value chain. If the lithium price recovers from the current weakness, the company could do well, though there’s no guarantee or indication of that happening any time soon.
