Lithium miner Pilbara Minerals is still a buy: Jarden
\nASX giant announced major potential expansion plans on Friday
\nBut analysts have knocked down price target on lower medium term lithium price forecasts<\/p>\n
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Lithium stocks have been in the doghouse for the past few months as prices have hovered at low levels, but there\u2019s never any shortage of enthusiasm when the EV metal to rule them all is involved.<\/p>\n
Pilbara Minerals (ASX:PLS)<\/strong><\/a> gave a boost of confidence to the market by utilising a US$1500\/t SC6 price in an expansion study on taking its Pilgangoora mine from a current 620,000tpa to ~2Mtpa, albeit at a 5.2% Li2O basis, from 2028.<\/a><\/p>\n An FID is unlikely until the end of last year, but the initial study\u2019s release has demonstrated the good and bad ahead for lithium investors.<\/p>\n On one side, it demonstrates incumbent producers remain constructive that prices will recover to levels that could support large increases in production.<\/p>\n At the same time, incumbent producers with economies of scale could flood the market and repeat the oversupply conditions seen regularly in the juvenile commodity since the EV boom began.<\/p>\n Jarden analysts led by Ben Lyons reduced their price target on PLS from $4.10 to $3.80 today but retained a buy rating with a projected return against this morning\u2019s share price of 22.2%.<\/p>\n The price target was cut after Jarden dropped its spodumene prices to US$1200\/t for FY25 and US$1250\/t for FY26, a move that would see its EBITDA forecasts for the lithium giant chopped 1% this year, 40% for FY25 and 46% for FY26.<\/p>\n \u201cThe EV phenomenon is not over, with global sales increasing by 34% to ~14.1m vehicles in CY23. CYTD sales growth also continues to exceed our forecasts, albeit solely driven by China, with 1Q sales +35% yoy,\u201d Lyons, Jon Bishop and Adam Bennett said.<\/p>\n \u201cLithium demand growth remains strong, despite the high-cost Chinese supply response, and PLS remains embedded in the second quartile of the cost curve.<\/p>\n \u201cIn our opinion, PLS have earned the right to grow, at least in line with demand \u2013 controlling a vast 100%-owned Resource, with proven metallurgy, high quality offtake partners, and an abundance of cash.<\/p>\n \u201cPLS currently represent ~8% of global supply, and the commercial team deals with suppliers to the leading global battery manufacturers on a daily basis.<\/p>\n \u201cWhilst the large scale of the conceptual P2000 expansion will likely cause some concern over potential market oversupply, we view it as extremely unlikely that the study was conducted in an information vacuum \u2013 rather we would expect it incorporated customer feedback and market intelligence from the commercial team.\u201d<\/p>\n Pilbara Minerals indicated its NPV would be $2.6b at US$1500\/t, with Jarden tipping an NPV of $2.2b at US$1200\/t, its long term spodumene price target. Both PLS and Jarden included sensitivities for US$1000\/t, but Jarden says long-term prices that low are not sustainable and may not capture the capital intensity of growing production.<\/p>\n \u201cFew operations would generate sufficient returns at these levels \u2013 perhaps only first and second quartile operations, including Greenbushes, Pilgangoora, Goulamina, Mt Holland (subject to ramp up performance), and perhaps Wodgina (depending upon sustaining capital requirements).\u201d<\/p>\n WoodMac notably came out with projections for lithium prices of US$1000\/t out to FY28 last week, a forecast which tanked the battery metals market on Friday.<\/p>\n \u00a0<\/p>\n\n <\/span>\u00a0<\/p>\n \u00a0<\/p>\n A bearish wave crashed across the ASX resources sector today, with iron ore, gold and uranium stocks all among the companies smashed by lower commodity prices.<\/p>\n A 2% drop for Fortescue (ASX:FMG)<\/strong><\/a> was one of the headline hits after iron ore prices dropped below US$105\/t with Chinese property starts now at near 20-year lows.<\/p>\n If there\u2019s one stat that really emphasises that #ironore<\/a> is headed back below $100, its the fact that Chinese property starts in May were at a fresh record low on a seasonally adjusted basis back to 2006 (!). The recent barrage of policy from the authorities has not yet even\u2026 pic.twitter.com\/XqD5LEEEE2<\/a><\/p>\n \u2014 Robert Rennie (@Robert__Rennie) June 23, 2024<\/a><\/p>\n\n Lithium stocks copped yet more hits, though Pilbara was stable at $3.11 and IGO (ASX:IGO)<\/strong><\/a> was up nearly 2% after announcing on Friday it would join Regis Resources (ASX:RRL)<\/strong><\/a> to fight a claim over an alleged royalty due to South32 (ASX:S32)<\/strong><\/a> over the Tropicana gold mine.<\/p>\n Coal miners were also hammered in the Monday bloodbath, while Evolution Mining (ASX:EVN)<\/strong><\/a> copped a 5.1% loss to lead the drops in the gold sector.<\/p>\n Jarden cut its price target on EVN from $2.91 to $2.84 today, a projected return of -21.5%, driven by lower mid-term production and higher capex expectations.<\/p>\n \u00a0<\/p>\n West African Resources (ASX:WAF)<\/strong><\/a> \u00a0(gold)\u00a0 +2.3%<\/p>\n Monadelphous Group (ASX:MND)<\/strong><\/a><\/strong> (mining\/engineering services) +2.6%<\/p>\n IGO (ASX:IGO)<\/strong><\/a> (lithium\/nickel) +2%<\/p>\n Resolute Mining (ASX:RSG)<\/strong><\/a> (gold) +1.9%<\/p>\n \u00a0<\/p>\n Deep Yellow (ASX:DYL)<\/strong><\/a> (uranium) -6.5%<\/p>\n Boss Energy (ASX:BOE)<\/strong><\/a> \u00a0(uranium) -5.3%<\/p>\n Evolution Mining (ASX:EVN)<\/strong><\/a> (gold\/copper) -5.1%<\/p>\n Gold Road Resources (ASX:GOR)<\/strong><\/a> \u00a0(gold) -4.6%<\/p>\n The post Monsters of Rock: Analysts keep faith in Pilbara to navigate choppy lithium waters<\/a> appeared first on Stockhead<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"And on the markets today<\/h2>\n
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