Why is the Pilbara Minerals share price zooming today?

Posted: 15 September 2021 2:30 pm

Shares in the lithium producer are up five-fold over the last 12 months.

Lithium producer Pilbara Minerals (ASX: PLS) has been favoured by ASX mining investors ever since the electric car revolution got underway a few years ago. On Wednesday, shares in the company topped the most traded charts on the ASX, surging nearly 11% to a new record price of $2.53.

Why has the PLS stock price taken off?

The surge comes after the Western Australia-based lithium miner announced the results of its second digital auction of spodumene concentrate, the stuff that is used to produce the lithium chemical used in electric vehicle batteries.

Pilbara Minerals said the latest auction on its battery materials exchange (BMX) sales and trading platform had yielded a top price of US$2,240 per tonne for its 8,000 dry metric tonne cargo.

The result is a near doubling of the price for the lithium raw material since the company’s first auction on 29 July, which yielded a top price of US$1,250 per tonne.

Industry experts are particularly impressed with the result given that the current shipment is for lower grade 5.5% spodumene concentrate, compared to the standard 6% product, and the five-fold surge in spodumene prices since it hit a bottom of US$380 per tonne last year.

“Given the strong margins yielded through the BMX trading platform to date, Pilbara Minerals expects to channel more concentrate sales through the platform, including concentrate generated from the recommencement of the Ngungaju processing plant,” it said in a statement to the ASX.

Key supplier

The record price underlines Pilbara’s status as a key supplier to the lithium market which is witnessing tight supplies as demand rises with the rapidly increasing manufacturing of electric vehicles.

The lithium producer reported that its shipments more than doubled in FY21 to 281,440 dry metric tonnes, helping revenue for the 12-month period also double to $175.8 million

Earlier this month, Pilbara also announced a 39% increase in the mineral resource at its 100%-owned Pilgangoora project in Western Australia to 308.9 million tonnes. The Pilgangoora operation is the world’s largest, independent hard-rock lithium operation, producing a spodumene and tantalite concentrate.

That has boosted investor sentiment in the battery materials sector and prompted analysts at Macquarie Group to place an "outperform" rating on the Pilbara Minerals stock due to rising demand and prices, with a 12-month price target of $2.70 a share.

The results of the latest auction would indicate further upside for a stock whose market value has already risen five-fold in the last 12 months!

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