TM - Pilbara Minerals Inks New Lithium Offtake with Chinese Company

Shares of Australia’s Pilbara Minerals (ASX:PLS) jumped more than 20 percent after it secured a new offtake agreement for its Pilgangoora lithium-tantalum project in Western Australia. 

Under the five year deal, announced on Wednesday (March 25), the Perth-based miner will provide up to 75,000 tonnes of spodumene concentrate per year to Chinese chemical and battery supplier Yibin Tianyi, with 60,000 tonnes to be supplied initially in 2020.

The Chinese company is currently constructing a lithium chemical plant in Sichuan with an initial production capacity of up to 25,000 tonnes per year of lithium chemicals; production is expected to start in June. By 2022, Yibin Tianyi is aiming to scale up production to 100,000 tonnes per year, which will make it one of the biggest lithium chemical suppliers in China.

Contemporary Amperex Technology (CATL), the world’s largest lithium-ion battery maker and a major Pilbara shareholder, holds a 15 percent stake in Yibin Tianyi.

CATL, which has three battery manufacturing facilities in China, has relationships with electric vehicle makers including Toyota (NYSE:TM), BMW (OTC Pink:BYMOF,ETR:BMW), Volkswagen (OTC Pink:VLKAF,FWB:VOW) and Honda (NYSE:HMC).

“Given Yibin Tianyi’s position as a key lithium chemical supplier to our largest shareholder CATL, our new partnership will further integrate Pilbara Minerals within the supply chain of the world’s largest electric vehicle battery manufacturer,” Pilbara Minerals Managing Director Ken Brinsden said.

“This will allow us to capture value from the future growth in the electric vehicle market while also supporting Yibin Tianyi’s growth ambitions to become one of the biggest lithium chemical suppliers in China,” he continued in Wednesday’s press release.

Sichuan-based Yibin Tianyi already received the first shipment of 20,000 tonnes of spodumene in March and a second shipment is targeted for April or early May, following a regular schedule thereafter.

Aside from Yibin Tianyi, Pilbara Minerals has offtake agreements in place with Chinese companies Ganfeng (OTC Pink:GNENF,SZSE:002460), General Lithium and automaker Great Wall Motor (OTC Pink:GWLLF,HKEX:2333), as well as with South Korea’s POSCO (NYSE:PKX).

Commenting on the impact of the coronavirus outbreak on its business, Pilbara Minerals said it has not experienced any material impact to its Pilgangoora operations as a direct result of the COVID-19 situation; however, it is taking steps to safeguard employees at its operations.

“Demand in the near term is likely to be tempered with end-use demand expected to remain soft in response to COVID-19,” it said in its press release. “At this stage, the company anticipates that shipped tonnes for the March 2020 quarter will be consistent with the lower end of previously announced guidance of 35,000 to 50,000 tonnes.”

In the current market conditions, Pilbara is continuing with its moderate production strategy at Pilgangoora to match output with customer demand.

On Wednesday, shares of Pilbara Minerals were trading at AU$0.16.

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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.