Lithium Watch – MJ Doubts PLS DFS

UK-based industry publication Mining Journal has questioned the price assumptions underpinning the recently released Pilgangoora lithium project definitive feasibility study from Pilbara Minerals. The Journal has observed that “there is very little sound analysis present” to justify the prices assumed for the 36 years of the project. While the Mining Journal recognises “there will undoubtedly be an uptick in demand over the next few years as growth in the battery space soars”, it questions the justification for extrapolating the favourable near term conditions over several decades. Mining Journal concludes quite reasonably that “even if many of the technological advances needed to leverage new supply are delayed by a few years, the supply will catch up”. In reviewing the study conclusions, Mining Journal also points out that the price used for valuation purposes is based on the spot market which does not account for the bulk of lithium traded. This is where sensitivity analysis is important. According to the feasibility study, a 25% decline in assumed sales prices implies a project value less than 75% of the company’s current market price.