Straws are discrete research notes that relate to a particular aspect of the company. Grouped under #hashtags, they are ranked by votes.
A good Straw offers a clear and concise perspective on the company and its prospects.
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Key takeaways:
Revenue: $757 M (down 65% on PCP)
Profit: $213 M (down 82% on PCP)
EPS: 7.25 cents (down 82% on PCP)
Trading on forward PER of around 25......................
Current share price includes a premium for a recovery in Spodumene prices........
Only Wodgina and Greenbushes are profitable at the current spot price
Pilgangoora is above the cost curve and appears this is what is driving the shorts.
From money of mine podcast.
https://www.youtube.com/@MoneyofMine
AustralianSuper builds stake in lithium miner Pilbara Minerals
Australia’s largest pension fund on Thursday emerged as a 5.1% stakeholder in Pilbara Minerals after snapping up shares now worth A$558 million ($371 million) at a time of heightened interest in the country’s lithium miners
The only shareholder with a larger stake in Pilbara Minerals is a subsidiary of Ganfeng Lithium Group, which owns 5.7%, according to LSEG data
A stock exchange filing, required as AustralianSuper‘s stake now makes it a “substantial shareholder”, showed the A$300 billion fund had built its position since July, picking up more shares in September and October as Pilbara‘s share price dropped
Lithium stocks have been battered as prices for hard rock lithium, or spodumene, have slumped 70% over the past year. Pilbara Minerals is the most shorted stock on the Australian Stock Exchange, ASX data shows, which has sent its shares down 21% over the past year
However, buyers are betting the plunge in lithium prices will be short-lived as supply shortages for battery makers reemerge
AustralianSuper declined to comment
The pension giant has become a more activist investor, leading opposition to a high-profile $10.6 billion bid for Australia’s top power retailer Origin Energy
Its move into Pilbara Minerals comes at the same time as mining magnates have snapped up stakes in takeover battles for some of Pilbara‘s rivals
Gina Rinehart, Australia’s richest person, spoiled Albemarle’s ALB.N A$6.6 billion bid for Liontown Resources LTR.AX
Pilbara‘s shares closed 2.3% higher on Thursday
From the Australian ...
PLS's short-sell percentage, that is the proportion of its free float that is short sold, which has risen above 20% for the first time. If there is any good news whatsoever, there will be some short covering on this one that could quickly escalate.
14-April-2024: I received a link to the following article today in an email from Roger Montgomery's investment management company:
https://rogermontgomery.com/pilbara-minerals-the-asxs-most-shorted-stock-yet-poised-for-long-term-success/ [19-March-2024]
[Not behind a paywall]
As a low-cost and long-life spodumene producer (spodumene is a raw material used to produce lithium for batteries in your phone, e-bike and electric vehicles (EVs)), Pilbara Minerals (ASX:PLS) is one of the highest quality single commodity miners on the ASX. The share price has been punished recently, with the spodumene price falling from over U.S.$8,000 per tonne to below U.S.$1,000 per tonne in just over 12 months.
This was driven by slowing demand as governments around the world wound back their subsidies for EVs, and the higher cost of living began to take a toll on consumers. A large oversupply had emerged as commodity producers ramped up supply, a logical response to high spodumene prices that were far above production costs for even the newest and most inefficient operators.
Given the tough operating environment, Pilbara Minerals management behaviour has showcased a measured and conservative approach to surviving the price cycle. The company has a strong net cash position of over $1.5 billion, built up from high prices in previous years and prudent deployment of capital. With cash costs of production of AU$691 per tonne, the company has been able to maintain profitable operations throughout this difficult period as higher-cost rivals suspend or close operations to reduce cash burn.
The company’s production expansion projects, P680 and P1000, are well progressed and have a two-fold effect. Increased production volume will go some way in offsetting falls in realised price, while increasing economies of scale decrease the unit cost of production per tonne. Current annual production is 620kt and will increase 60 per cent to 1 million tonnes beyond FY25.
The company has also partnered up for mid-stream and downstream projects, which have the potential to increase future returns to shareholders. A mid-stream joint venture operation with Calix Ltd, an environmental technology company, is progressing with the objective of decarbonising the processing of spodumene. A large South Korean steel company, POSCO, is the downstream project partner that has started the commissioning of a lithium hydroxide plant, producing the finished product used in batteries and EVs.
With such strong fundamentals providing solid downside protection while simultaneously setting a platform for significant upside, the Australian Eagle Asset Management team have gradually built up a position in Pilbara Minerals in the past few months. As the most shorted stock on the ASX, the share price could rise significantly when the spodumene price inevitably recovers, forcing short sellers to close their positions.
While the team cannot claim any expertise in forecasting spodumene prices, we remain confident, given its current strong balance sheet and low cost of production, that Pilbara Minerals will be one of the long-term winners of the future as the world moves away from fossil fuels and accelerates towards renewable energy.
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The Montgomery Fund and the Montgomery [Private] Fund owns shares in Pilbara Minerals. This blog was prepared 18 March 2024 with the information we have today, and our view may change. It does not constitute formal advice or professional investment advice. If you wish to trade Pilbara Minerals, you should seek financial advice.
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By Daniel Chan
Daniel Chan joined Australian Eagle Asset Management in 2014 as an Investment Analyst, and beyond the usual realms of financial modelling, Daniel is also responsible for writing research papers for portfolio stocks as well as stocks within the ASX 100. He is also responsible for the implementation of the Australian Eagle investment philosophy across the portfolio and bringing to the team’s attention any company inflection points that may assist with the purchase or sale of these stocks.
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I always read these sort of bullish reports from the POV that the writers either holds shares themselves or the company they work for does, or else it's a paid report on behalf of the company being reported on. That said, you can often still find useful pieces of information in these reports that do help to form an independent view - it's just always best to use multiple sources of info rather than just one, especially when that one is expected to paint the company in the best possible light.
That said, I can't argue that Pilbara Minerals (PLS), as Australia's most shorted company, with more than 20% of their SOI being shorted - see here: ShortMan - Short position graph for PLS ...is primed for a northbound SP spike IF the shorters are wrong and there is a short squeeze.
The argument behind shorting PLS appears to be more around shorting lithium, and PLS being the largest and easiest ASX-listed pure-lithium play to short.
My own thoughts on that are that PLS is the strongest pure lithium player in Australia (possible the World) and they're in a very strong (net cash) position with a huge pile of cash to tide them over even if prices stay below their cost of production for a decent chunk of time, and if I was going to short a lithium company, PLS would not be my first choice. [I never short any companies by the way, that was just a hypothetical]
Another analyst, Gaurav Sodhi from Intelligent Investor has also been bullish on PLS, although he has recently (in early March) changed his "Buy" call on PLS to a "Hold".
The Intelligent Investor Australian Equity Income Fund (Managed Fund) (ASX:INIF), the Intelligent Investor Ethical Share Fund (Managed Fund) (ASX:INES), and the Intelligent Investor Australian Equity Growth Fund (Managed Fund) (ASX:IIGF) all own shares in Pilbara Minerals Limited (PLS).
Here's a link to Gaurav's latest thoughts on PLS - may be behind a paywall:
Pilbara Minerals: Interim result 2024 - Intelligent Investor [01-Mar-2024]
I don't hold PLS - as I'm not ready to have direct exposure to a pure lithium play. I don't understand the supply/demand dynamics and environment in lithium enough to be comfortable with that exposure, however I do hold MinRes (MIN) shares in multiple portfolios (including here) and they do have some lithium assets - but it's not all they do - they are also diversified across iron ore, mining services, and investing.
But back to PLS. The company's management have done well. They've acquired good assets at cheap prices and then worked them hard and built up a very healthy warchest of cash while investing billions back into their own business to lower their own costs and set themselves up very nicely for the future. They also developed a sort of lithium auction system that should allow them to rapidly benefit from higher lithium prices when they come, rather than having locked in all of their future production at set prices for years as many other lithium miners have done. Excellent foresight and planning, superb execution from a quality management team; there's a lot to like about Pilbara Minerals.
If and when I want pure lithium exposure, this is the company I would be looking to get it through.
Here's just the start of Gaurav's March article on PLS:
We all knew this was coming. Amid tumbling lithium prices, Pilbara Minerals’ margins, profits and cash flow all crashed.
Net profits for the period fell from $1.2bn to $220m; operating margins crumbled from 83% to 55%. This was because received lithium prices went from almost US$5,000 a tonne to US$1,645.
Despite those dramatic falls, this result was a demonstration of how good Pilbara’s wholly-owned asset is.
The fact that the miner still made operating margins of over 50% and operating cash flows of over $500m for the half year neatly illustrates why we upgraded Pilbara amid grim pessimism (see Pilbara Minerals: luck and lithium).
Of course, lithium prices are lower now, so those margins will be crunched again, but no one else in the industry is making much cash. Here we have proof, if we needed any more, that Pilbara is the best hard rock lithium asset in the world.
Pilbara is doing what low-cost mines ought to do: maximising output.
For more, see here: https://www.intelligentinvestor.com.au/recommendations/pilbara-minerals-interim-result-2024/153340
Production relatively flat @ 144.2 kT
Sales up 6%
Revenue down 42% on prior quarter, as Lithium Hydroxide prices collapse.
Realised price per Tonne down 31% on prior quarter.
Looks to be trading on a forward PER of 15, assuming they maintain current realised price. The problem is Spodumene prices have fallen a further 20% over the past month.
IMO, there appears to be more downside than upside at present.
How Will Pilbara Minerals Spend Their $3.3B? With CEO Dale Henderson | Daily Mining Show - YouTube
Aug 4, 2023: "Money of Mine has delivered another great interview for the Money Miners today with none other than Pilbara Minerals CEO Dale Henderson."
"We visited the Pilgangoora operations and got the chance to sit down with the boss and grill him on how they’ll spending their big pile of cash, building an enduring business and his take on how hard it will be for competitors to bring lithium production online."
"We also ran through Trav’s Top Tweets, with as always, some hilarious content."
"Next week we’ll be at Diggers and Dealers in Kalgoorlie, so if you’re around town, come to De Bernales where we’ll be set up and tell us what you’re hearing on the decline!"
All Money of Mine episodes are for informational purposes only and may contain forward-looking statements that may not eventuate. The co-hosts are not financial advisers and any views expressed are their opinion only. Please do your own research before making any investment decision or alternatively seek advice from a registered financial professional.
0:00 Preview
0:24 Intro
3:11 Our Thoughts on Pilbara Minerals site Pilgangoora
8:43 Interview with Pilbara Minerals CEO Dale Henderson
21:20 Trav’s Top Tweets
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Disclosure: I found this interview really interesting - however I do not own any PLS shares at this point in time. They are certainly on my watchlist.
By the way, for those interested in lithium and how long it takes between declaring a Maiden Resource Estimate and actual production, which is quite a few years, and is longer for mines outside of Australia it seems, and the money value of time - or the "time value of money" as Trav put it - over these "time to production" periods - especially when production takes years longer to achieve than expected, the MoM podcast boys had an excellent discussion on this in their July 31st podcast (just over a week ago) which started off about the Maiden Resource estimate that had just been declared by Patriot Battery Metals (PMT.asx) but covered a number of other names as well - you could start here for just that discussion, or at the beginning if you want to listen to the whole podcast.
[I don't hold PMT either, but I do hold MIN whose founder and boss Chris Ellison was quoted by the boys in that podcast]
Now voting power: 6.19%
Guess JP Morgan & affiliates are shorting PLS.
PLS most shorted stock on the ASX
Tantalite production decreased in Q4 FY23 with 7,224 lbs produced relative to 8,575 lbs in Q3 FY23. For the full year FY23 period, the Group recorded 620.1k dmt of concentrate production, 64% higher than FY22 and at the top end of production guidance. The increase in production for the full year was driven by a combination of product grade strategy and improvements in productivity.
Share price reaction ; $4.95 up ~7% this arvo
supported by a $20mill Govt Grant . Executed April 2023
ASX +security code Security description PLS, ORDINARY FULLY PAID
Number of +securities to be quoted 168,678
Issue date 04/04/2023
Looks ok ..But the resource price must stand -up. ( Chart here )
below MIN vs the Li Carb' Price: ........the red -line incase yur colored blind"
So Li Carb chart to test the bottom of the price "pit" then bounce out / bottom out.
Market Cap ($M): 11,872
Return on invested capital: is good
Free cash flow: ablility to pay a fully franked dividend is ok
@west it gets better…the sell rating with an upgrade from 3.15 to 3.40 has now (allegedly) been changed to neutral and a new price target of 4.70. All in the space of a few days. Oh my, it’s a comedy show unless you are paying for advice then, you wouldn’t know what to think.
Alex Gluyas
Share post
UBS has upgraded its lithium price forecasts and stock valuations, noting that the battery metal will remain in a physical deficit for the near and medium term.
The broker refreshed its outlook following China’s rapid reopening and growing expectations for a sales rebound post Chinese New Year.
“We believe lithium markets will remain in deficit for the near and medium term before moving to structural deficit long term,” Lachlan Shaw, analyst at UBS.
“This needs a demand rationing price, for which we have seen no evidence in the past 12 months despite record-high prices that are orders of magnitude above costs.”
UBS upgraded its spodumene/chemical prices by up to 50 per cent which led to earnings upgrades across its coverage.
The broker upgraded Pilbara Minerals to “neutral”, and Mineral Resources and IGO to “buy”. UBS maintained its “buy” rating on Allkem.
For those interested the Quarterly Investor Conference Call from PLS is below. It provides a nice summary of the present and future opportunities and challenges as the company sees them.
I think it’s worth a listen for holders, non-holders and those who may be considering a holding.
What I found interesting is listening to some of the questions raised by GS, UBS, JPM etc and comparing them to the questions Andrew raises in the Strawman Interviews. Obviously, it’s not a like for like comparison but, it’s just interesting to see the difference (ie what I see as a short term focus almost looking for a gotcha moment) in the questions from the larger investment houses v Andrew’s more people focused in depth review of the people running the show and what they are doing to grow and develop.
https://www.webcasts.com.au/13125/player/index.php?player_id=20349&skip_stats=1
Add the potential dividend (assume interim, full, interim) back to their 3.40 (12m) price target and you are already getting back to yesterdays price. So one could hedge their bets.
The UBS valuations are priced on catastrophic drops in Lithium. With Liontown announcing today an increase in construction costs developers could be under further cost pressures to get production going. Will UBS redo their PLS price prediction?
So while the producers clean up developers face upward cost pressures to start producing.
This reminds me so much of the FMG v investment bank battles during their growth. These investment - advisory companies are stuck in the days where they think Retail holders can not access news themselves.
At $3.40 assuming just last quarter results x 4 (and no dividend payout) PLS could have $6B in the bank!
So UBS would like their clients to think that PLS should then only be valued at 10B?
I am not good at forecasting so I am happy to run off the present data. I will leave the guess work to the large investment and advisory financial companies.
The day after PLS quarterly results - oh my! Smells of desperation needing to get this update out today.
Pilbara Quarterly trading update
I think this article is important because it highlights that the world when it comes to EVs and thus Li requirements is greater than just China and the USA. So when we are talking about EVs and lithium demand it’s important to not just rely on information that suggests potential slow down or uptakes in China or the US due to XXX. Let’s not forget China “makes and sells” not just for their own consumption but, the world!
https://europe.autonews.com/automakers/chinas-ev-exports-surge-record-european-demand
Pilbara director Miriam Stanborough bought on-market 18000 shares at $3.86 on Wednesday
PLS continue to clean up holding these auctions. When one considers the cash being delivered by this company and 1) it’s not at full capacity, 2) a majority of present earnings have been locked in at “significantly” lower earnings it’s valuation of 4.55 just does not add up.
I understand the “it’s a commodity stock” but just how many so called tech stocks earning no money, with the dream of a solution, and a fanciful unlimited TAM continue to bleed cash are priced “significantly higher” on a relative basis even after big pull backs.
Lithium isn’t going anywhere and PLS a “producer” earning a bucket load of cash is right in the mix. I can’t help but think we have seen this story played out again and again (think FMG).
Maybe it’s a mix of “it’s a commodity” or “the price of Li has to retreat” or “looking for the spec explorer rather than the actual producer to get the life changing multiple expansion” or the so called investment company reports released “referring to lower valuations” whilst they accumulate in the background (does this really happen - ha ha).
If one looks past the “noise” and analyses the “numbers” I can’t help but think PLS is a future BHP, RIO or FMG if it isn’t already.
Note: I hold iRL.
PLS 12th BMX Auction.
US$8,299/DMT
PLS Share price $$4.55
Participating interests in the JV will be 55% Pilbara Minerals and 45% Calix, with each party funding their share of operating and capital costs and Calix licensing their patented technology and calcination knowhow into the JV
Latest BMX auction results.
16/11/22 $7805 dmt
There has been a steady increase in price month on month
About a year ago, 26/10/21, the price was $2350
I’m sure this rate of increase is unsustainable but have no idea when it will slow or reverse.
Backs up yesterday’s announcement to start paying dividends from FCF, 20-30% payout from a cash balance of 1.375b
Held
"Battery Material Exchange" equates to a price of ~US$7,708/dmt (SC6.0, CIF China basis).
Above: YTD Growth returns (Chart shows the NHC coal ahead - but will unwind when a dark swan swims in)
Above: 5yr Growth returns
qualified buyers with a total of 22 bids received online during the 30-minute auction window. equates to a price of ~US$7,708/dmt (SC6.0, CIF China basis).
Thought I'd post here instead of CXO as PLS is a current producer
Wonder if demand destruction for EVs could be on the horizon? And how much of the EV hype is driven by the current Biden administration and other western govs round the world. I usually don't pay much attention to Zerohedge but this is a good article.
Lithium prices hit new record as EV affordability concerns mount
$1.2 Bill Revenue plus 577% , $814.5Mill EBITDA, $561.8Mill NPAT
That is it dig up the dirt and ship it around and you get paid,
PowerPoint Presentation (markitdigital.com)
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