On Monday, RBC Capital maintained its positive stance on Pilbara Minerals Ltd (PLS:AU), reiterating an Outperform rating and a stock price target of AUD4.10. The endorsement follows the company's release of a pre-feasibility study (PFS) on the expansion of its Pilgangoora project to approximately 1.9 million tonnes per annum (Mtpa), known as P2000. The study is seen as a confirmation of Pilgangoora's potential for profitable growth beyond the current P1000 phase.
The expansion is considered to offer attractive economics based on RBC Capital's base case scenario. As a result, the firm has included the P2000 expansion in its base case calculations, factoring in an additional A$600 million of capital expenditure for pre-stripping. This adjustment has led to an approximate A$180 million increase in the asset/group net asset value (NAV).
The first production from the expanded Pilgangoora operation is anticipated to commence in calendar year 2028, which is expected to coincide with projected deficits in the global lithium market.
RBC Capital's continued support for Pilbara Minerals at a price target of AUD4.10 is based on several key factors: an estimated 20-30% growth in lithium carbonate equivalent (LCE) production between FY24e-25e, the company's ability to fund growth internally complemented by a robust balance sheet, and an implied total shareholder return (TSR) upside of over 30%.
The expansion project is part of the company's strategy to capitalize on the growing demand for lithium, which is a critical component in the manufacture of batteries for electric vehicles and other technologies. With the P2000 expansion, Pilbara Minerals aims to solidify its position as a significant player in the lithium market.
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