For Pilbara investors, it's a game of patience

For investors in Pilbara Minerals (ASX: PLS), the hardest part is now: being patient.

Australia’s biggest pure-play lithium miner is doing all the right things: executing well, controlling what it can, and avoiding unwelcome surprises.

CEO Dale Henderson says the fundamentals remain intact, pointing out that today’s prices aren’t high enough to bring on fresh supply - hinting at future tightness.

"The long-term fundamentals for lithium remain intact. Current prices are not sufficient to incentivise new supply, which points to potential tightness ahead. While market volatility may persist in the near term, our confidence is anchored in what we control - disciplined execution, operational excellence and strategic agility," he says.

Martin Currie’s Chris Schade agrees, arguing that Henderson is running the company well and that the risks for lithium prices remain skewed to the upside, even if the thesis takes time to play out.

We sit down with Schade to unpack the key metrics from the result, assess whether Pilbara’s balance sheet can withstand a prolonged period of soft prices, and explore both the risks and the prospects for a lithium price rebound.

Pilbara Minerals FY25 key highlights

• Revenue down 39% to $769m vs. $771m ests (0.3% miss)
• EBITDA down 83% to $97m vs. $84.7m ests (15% beat, but mainly due to accounting treatment of mid-stream demo plant)
• Statutory loss of $196m (vs. $257m profit a year ago)
• Underlying loss of $88m (vs. $318m profit a year ago)
• No final dividend
• Reaffirmed FY26 production guidance of 820-870kt at unit operating costs of A$560-600/t

What was the key takeaway from PLS's result in one sentence?

The main takeaway is that they’re doing a great job controlling the controllables, but ultimately their destiny lies outside their control. It’s driven by the market, which is largely a China phenomenon.

Were there any surprises in this result that you think investors need to be aware of?

Honestly, no. It was a clean result, broadly as expected. They’re executing well into their recent expansions, and there’s still scope to further optimise operations and improve their cost position.

One thing to note is that they’ve been burning cash, mainly due to capex. For people not following closely, it might be surprising how quickly a substantial cash balance has come down over the last couple of years, with lower prices, tax payments, and pretty significant capex.

They still reported $1 billion in cash and $1.6 billion in liquidity overall. Are you comfortable with PLS's liquidity in this environment?

Yes. The balance sheet is still very healthy. Net cash is down to about $600 million, but with debt facilities included, total liquidity is $1.6 billion. You wouldn’t want them to run a lot of net debt in a volatile, relatively immature market like lithium. We’re past the big cash burn stage and they’re essentially operating at cash break-even, even in a tough market.

Capex is largely done, so the balance sheet looks fine. Compared to peers like Liontown (post-raise) and Mineral Resources, Pilbara’s balance sheet is a lot better.

Would you buy, hold or sell PLS off the back of this result?

RATING: HOLD

I’m not sure the result itself changes the investment case. It wasn’t particularly exciting. I’d say “hold.”

Obviously, they've had a nice little rally recently and that's largely around speculation that  there's going to be supply discipline in China. But actual evidence is limited - yes, some supply has come out, but whether that’s structural or just temporary is debatable. 

The big swing factor is the CATL (Contemporary Amperex Technology) mine; if it comes back quicker than expected, that’s a big negative catalyst.

So there’s risk both ways. At today’s price, you’re essentially paying fair value unless you ascribe value to post-2030 growth projects. 

Risk-reward doesn’t look especially attractive, but Pilbara remains the standout name in the sector and you probably want some exposure.

Lithium prices are well off their highs. Do you see prospects for a turnaround?

Supply that was committed during the boom is still coming through - from Africa, Australia via Pilbara, Liontown, and Wesfarmers; Argentina, and China. So supply growth is still broad-based.

The key risk is whether the CATL lepidolite mine comes back sooner rather than later. Right now the market is well supplied, and with that mine back, it would be very well supplied. On our numbers, the market remains oversupplied through at least 2028.

For prices to move sustainably above $1,000 a tonne - we’re around $900 now - you’d need the market to shift back into an incentive pricing environment that justifies new supply. That’s more of a 2030s story, not something we see in the next couple of years. So a sustained price recovery that would justify a significantly higher share price looks years away, not months.

I'd also add that people shouldn’t forget lithium is the transition commodity - the oil of electrification. The long-term outlook remains robust.

We’re in a phase where supply responded aggressively to the price spike. Demand growth is still mid-to-high teens, but Europe and the US under delivered versus expectations. China’s done better, but the 'hockey stick' demand forecasts didn’t eventuate.

The market now needs time to grow out of that excess capacity. The fundamentals are still there, but short-, medium-, and long-term dynamics look very different.

Are there any risks investors need to be aware of?

Short-term, it’s that CATL mine. There’s optimism around China’s 'anti-involution' agenda - profitability being prioritised over volume. But if that mine restarts sooner than expected, that thesis collapses. I’d expect a harsh reaction in lithium prices and stocks.

On company-specific risks, balance sheet and management are strong, and the strategy is clear. The only risk would be if they took on additional expansion projects, but that’s not on the agenda right now.

From 1 to 5, where 1 is cheap and 5 is expensive, how much value are you seeing on the ASX today?

RATING: 4-5

Between four and five. Pretty expensive. Just look at headline names like Wesfarmers or CBA - they’re trading multiple standard deviations above long-term averages. While some stocks trade at big premiums, there’s also a large bucket trading at much more attractive valuations. For our value style, that creates good opportunities for relative returns.