Should I buy Pilbara Minerals shares following the lithium miner’s latest update?

A woman sits at her computer with her hand to her mouth and a contemplative smile on her face as she reads about the performance of Allkem shares on her computer

A woman sits at her computer with her hand to her mouth and a contemplative smile on her face as she reads about the performance of Allkem shares on her computer

The Pilbara Minerals Ltd (ASX: PLS) share price has gone on a great run since the start of 2023. It has already risen by 25% and continues to impress investors.

The ASX lithium share just released its quarterly update for the three months to 31 December 2022. It was able to tell investors about its production, sales price, huge cash pile, and more. The company jumped 13% on the day the update was released.

Let’s have a look at the highlights.

Quarterly update

Pilbara Minerals revealed that spodumene concentrate production was 162,151 dry metric tonnes (dmt), an increase of 10% quarter over quarter. Shipments were up 8% quarter over quarter to 148,627 dmt.

The average realised sales price for the spodumene concentrate was US$5,668 per dmt, up 33% quarter over quarter.

But the unit operating costs declined 5% quarter on quarter to A$579 per dmt.

The ASX lithium share also reported a substantial increase in its cash balance. It rose $851.1 million to $2.23 billion.

Pilbara Minerals pointed to a number of other highlights during the quarter which may have impacted the company’s shares.

It saw improved pricing outcomes after negotiating price reviews with major customers.

The board approved pre-FID (final investment decision) expansion project funding of $38.3 million to maintain the company’s project schedule, with the final investment decision scheduled within the three months to March 2023.

It also announced a formal joint venture with Calix Ltd (ASX: CXL) to support the future development of a mid-stream demonstration project.

A $250 million Australian government debt facility was approved to support the company’s P680 expansion project. This involves processing improvements at the Pilgan plant in Western Australia.

Finally, the ASX lithium share announced a capital management framework, including its first dividend policy.

Are Pilbara Minerals shares a buy?

I think the business has a very promising future. But buying at the right Pilbara Minerals share price could be key to giving investors a margin of safety.

It’s certainly not cheap at the moment. But the average realised selling price in FY23 to date is almost US$5,000 per dmt. Time will tell if the lithium price falls back, but the long-term demand for electric vehicles looks very promising.

At the current lithium price, Pilbara Minerals is making an enormous amount of cash flow, as we can see from how rapidly its cash balance is building.

Looking at the Pilbara Minerals share price of $4.55, it’s valued at nine times FY24’s estimated earnings according to Commsec.

I think it can still be a good long-term buy at this level, particularly with its plans to increase its production and also get more involved with the lithium value chain.

However, after the recent run, it’s a bit more expensive. The ASX lithium share could go both higher or lower, so I think it’s worthwhile expecting volatility. Taking that mentality may make the ride seem less scary.

The post Should I buy Pilbara Minerals shares following the lithium miner’s latest update? appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison 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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