Is the Pilbara Minerals value-add lithium strategy worth its salt?

A GWR Group female employee in a hard hat and overalls with high visibility stripes sits at the wheel of a large mining vehicle with mining equipment in the background.A GWR Group female employee in a hard hat and overalls with high visibility stripes sits at the wheel of a large mining vehicle with mining equipment in the background.

Pilbara Minerals Ltd (ASX: PLS) outlined its strategy to profit from the entire lithium supply chain in an on-site presentation at its 100%-owned Pilgangoora Project in Western Australia on Friday.

In its presentation, Pilbara Minerals said it was “positioning to capture value throughout the entire lithium raw material and chemical supply chain”.

The company has a strategic plan to become a “fully integrated battery grade lithium hydroxide producer”.

Tesla Inc (NASDAQ: TSLA) CEO and electric vehicles pioneer Elon Musk recently described lithium processing as “a licence to print money” with “software margins”.

At market close, the Pilbara Minerals share price finished up 1.47% to $2.77 today.

What’s the plan?

Pilbara Minerals told investors today that it saw three components to the lithium supply chain.

The upstream component refers to the spodumene concentrate Pilbara already extracts from the ground. The current process is “carbon intensive”, with only 5% to 6% lithium oxide in the raw course material dug out of the dirt. More than 90% of the export mass shipped to customers contains aluminosilicates.

The proposed midstream component would reduce the carbon intensity and completely remove the aluminosilicates. The refining process would create lithium salts with 35%-plus lithium oxide. The aluminosilicates would remain on-site at the mine.

The proposed downstream component involves further refining to create lithium fine chemicals.

Developments send share price higher

Investors appear to be excited about Pilbara Minerals plans for expansion along the full lithium supply chain.

In the June quarter, Pilbara signed a binding memorandum of understanding with Australian technology company Calix Ltd (ASX: CXL) for a joint venture relating to the midstream process.

The JV involves the development of a demonstration plant and potential future commercialisation of Calix refining technology at Pilgangoora.

The Federal Government awarded a $20 million Modern Manufacturing Initiative Grant to help fund the project. Investors gave the Pilbara Minerals share price a 5% boost on the day of the announcement.

Pilbara Minerals is working on the downstream component through a joint venture with South Korean company POSCO.

In the June quarter, detailed engineering, procurement, site preparation and road works began on constructing a 43,000tpa LHM primary lithium hydroxide chemical processing facility in Gwangyang.

Investors reacted positively to the JV announcement on 26 October 2021. They sent Pilbara Minerals shares 8% northwards on the day.

In addition, the Pilbara Minerals share price surged 6% yesterday. This was on the back of a 50% boost to production, as outlined in the company’s June quarterly activities report.

Pilbara Minerals share price snapshot

Pilbara Minerals is a leading ASX lithium share whose share price has exploded 736% over two years.

Its Pilgangoora operation is the world’s largest independent hard-rock lithium mine. Two processing plants on-site — Pilgan and Ngungaju — produce spodumene and tantalite concentrate.

The post Is the Pilbara Minerals value-add lithium strategy worth its salt? appeared first on The Motley Fool Australia.

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Motley Fool contributor Bronwyn Allen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. 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 Scott Phillips.

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