I will just let this do the talking. An 11c interim dividend will now bring in the big funds obliged to buy / include top 100 dividend payers.

Where to next for PLS?

https://auto.economictimes.indiatimes.com/news/auto-components/pilbara-minerals-in-very-early-stages-of-considering-ma/97767870

@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.

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.

Those realised spodumene prices 33% higher only came into effect from Dec. So a third of the quarter. Next quarter will be even bigger with those prices being realised for the whole 3 month period! I think one can positively assume the 34c dividend indicated by MAQ is now not only looking realistic but, even on the low end. I wouldn’t be surprised to see them re-evaluate this estimate.

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

Customer price reviews achieve improved pricing power for Li shipped from December for major off-take customers from around 4.8k to 6.3k per dmt for SC6.0 equivalent!

P680 expansion on track with revised capital cost estimates. An increase of around 100m in costs.

Well those revenue/profit numbers will need reworking with this significant increased contract prices.

Further emphasises the importance of looking at the actual data (numbers) then “noise” coming from certain investment companies.

https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02615232-6A1129537?access_token=83ff96335c2d45a094df02a206a39ff4

Wow! What day. It allowed me to start a position with PLS on my Strawman account to compliment my position iRL. The difference being the average buy in price of 4.03 SM v 3.79RL.

As previously reported by @raymon68 PLS released news that they auctioned 10000 tonnes of additional uncontracted spod achieving a price of 7500 USD per dry metric tonne (dmt). This equates to revenue of 111,000,000 AUD! After costs of 600 USD per metric tonne or 9,000,000 means PLS earns 101,000,000 AUD before tax!

Let that sink in!

If we assume a 30% tax rate that leaves 70,000,000 AUD banked!

So what was todays market response to a <4% drop on its previous spot auction price of ~7800 USD per dmt, well it was a 11.5% (50c) share price drop! To top it off it’s drop was one of if not the largest of the major listed Lithium ASX stocks and it’s actually a “producer” not just an “explorer”! The fear was that in the short term spot prices may have peaked!

I understand the market is forward looking but today seemed maybe just a little of an over reaction. Considering a majority >90% of 147,000+ tonnes PLS sold last quarter (up from 127,000 quarter before) was at fixed contracts ~4300 USD per dmt I would say those margins still look attractive.

When one considers some of these fixed term contracts wind up in the new year and new buyers, new prices and (+ more volume) is up the maintenance of current margins seem to have a significant buffer.

For those unfamiliar PLS are now running at an annualised production rate of ~588,000 tonnes of spod this FY (60% of their medium term capacity). Even at at the average of ~4300 USD tonne (reported in their last quarterly results) well below the spot auction rates of ~7500 USD / dmt they will be looking to gross ~2.5 billion or ~2.2 billion after costs but before tax. Again assuming 30% tax rate and we have 1.5B NPAT or earnings of 50c per share resulting in a FPE of 8.

That will position it probably as a top 10 earner for the year on the ASX!

The question I asked myself tonight when the market closed was I wonder how many of those buyers and sellers of PLS who sold out in response to the possibility of short term spod prices having peaked know what the average sale price per dmt PLS achieved last quarter?

The Lithium ride continues!

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.

My only previous exposure to mining was buying a stake in FMG in 2021 at 13.99 and selling in Jan for 20.70. So statistically speaking mining stock(s) have been good to me…ha ha. This after many many years ignoring them because I developed a bias listening to the “it’s a commodity”, they are “cyclical”, they are risk all the while happy to take position in tech companies in the red 10m a quarter building out the next big thing.

So this year I decided to do some research and ignore all those mining bias cliches which led me to taking a position in PLS.

Why PLS? Well firstly they are actually producing and selling lithium so the risk is significantly reduced rather than chasing the non profitable explorer. I have enough non profitable risk assets in my tech bucket to satisfy this itch.

I might have missed those 50 or 100x gains but I am confident PLS can bring positive gain over the next 5 years to be a solid investment.

However I digress. I am not the first to bring it up but Lithium really does seems like the new Iron Ore so getting exposure via a company actually producing and piling up enormous amounts of cash (adding 783m last quarter!!!) seemed like the best way to play this exposure.

At present PLS are operating at about 50-55% of their planned target capacity from which last quarter they earned on average 4.2k per tonne of spodumene concentrate. This is mostly from contracted locked in sales. So they are not even benefiting from the 7-8k per tonne spot prices presently on offer except for the monthly online auctions they hold selling 5000 tonne which allows them to collect prices close to 8k per tonne.

Even if the spot prices dropped 40-50% that would still only be equal to their present average contract values.

However, considering worldwide demand is presently outstripping supply at the world hastens it’s push to minimise the use of ICE vehicles (just one area lithium is required) this is “probably not”likely in the near future.

That’s not to say a correction or rationalisation is not going to occur. However from my research companies in need of Li are climbing over themselves to lock in lithium from explorers not due to produce for years.

So back to the PLS numbers. Well once these locked in contracts cycle through PLS can then effectively double their present contract values which would have them closing in on 1.5 Billion cash (it sounds ridiculous typing it) each quarter at its present 55% capacity!!!

In the meantime they are likely to have 2.5-3.5 Billion in cash accrued in 12m, are operating at around 50-55% capacity, have a joint venture lithium hydroxide processing plant in Korea ready to come online, will start paying dividends of 20-30% of cash after investment opportunities (2023)

For me the PLS story is compelling so as an investor it’s hard not to at least have a play in this space and a producer with early mover advantage seems a good bet.

I hold PLS IRL.

I hold CXO SM as a way of observing another Lithium play just (about) starting its production phase.