PLS 1.45% 34.0¢ pilbara minerals limited

The PLS SP should be somewhere in the 50c region. We hit 88c...

  1. 558 Posts.
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    The PLS SP should be somewhere in the 50c region. We hit 88c just over 5 months ago. Then low recovery rates became knowledge, in turn higher costs and then hiatus for plant rectification works and then supply surpluses hit. We were in the 60c region as lower Spod prices hit ... and then speculation about a CR raised its ugly head and we got hammered. Down, down, down to hit 31.5c.


    CRs always suggest something is wrong. Most speculation was about having to raise $A60m. As it turn out we did have to ... for the JV. The POSCO JV was expected to be funded by USD80m Convertible Bond and the balance from working profits of Stage 1. However Spod prices have fallen and recovery rates haven't met DFS forecasts and in turn costs too high and those "working profits" haven't eventuated. Hence the need to CR to finance the JV. So I don't see it as a bad thing. In a best case scenario the JV should add 25-30c to our SP (in theory at least) ... eventually.


    We await news on whether plant rectification works have been successful. Determination was expected by the end of CY19 but I imagine this has been put back given the plant hiatus during the Sept19 quarter. So earliest confirmation will be Australia Day when the Dec19 quarterly is announced. However Apr19s announcement will hopefully put this matter to bed.


    So many non holding blowflies on the PLS forum these days. I don't put anyone on ignore. They declare their intentions early and I just don't read their posts. I just get caught out when good posters respond to blowflies. Be Zenlike dude.


    Everything Lithium seems to be resurgent lately. Risk off investment bias receding. Two weeks ago the small but specific BATT fell under $10 but last night hit $11.00.


    We raised the $A60m and chose to raise an additional $A31m which was massively oversubscribed by Sophs (looking for validation anyone?) for working capital in increasingly scary times (funny how fear builds on fear). The additiional $A20m aimed at small retail SHs seems moreso like throwing a poor dog (us) a bone.

    The extra working capital is a bonus but was is it just a kneejerk reaction to the fear that besets markets at this time of year?


    Certainly the big catalyst for us has to be resurgent Spod prices ... still waiting. The trade war has undoubtedly slowed China but additional stimulus should be provided. We've seen precursors of lowering bank ratios and now opening of financial markets to foreign investors. At least, for the good of the EV disruption, Australia has proved it can move quickly to supply the good stuff. Perhaps downstream participants fears of lack of supply have been allayed and entice them to move their plans faster. I'd always hoped demand would dictate there, perhaps it still will.


    I would expect the PLS SP to gravitate back up to the 50c region by the end of the year. Heres hoping CY20 gives us higher Spod prices, strong plant recoveries and more confidence for plant expansion. Despite the recent dilutions, our SP deserves to be upwards of $1.50.


    I was amazed and felt so lucky getting in at 38.5c in Aug17. To see the SP at 34c now, after all the progress made, seems almost laughable. This is a good medium to long term buy.


 
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