Fear and loathing in the lithium bear market

The lithium market has been distressed over the past 12 months, with significant falls experienced in lithium product prices and in the stock prices of lithium companies.

State of the market

Spodumene prices have fallen off a cliff from US$3750/t a year ago, to around US$1250/t today - a 66% drop.

A snapshot of 12 month of lithium stocks’ performance paints an ugly picture.

Albermarle:

Sigma Lithium:

Arcadium Lithium (Merged Allkem/Livent):

IGO:

Pilbara Minerals:

Pilbara - the outlier

Pilbara are the clear outlier amongst its peer group, experiencing only around half the % fall of its peers.

Despite the terrible market conditions, Pilbara have pushed ahead with an expansion pre-feasilibity study (P2000) to potentially expand its production capacity to 2 mtpa up from its present 680 ktpa. The company are already undertaking further growth initiatives to lift production to 1 mpta, a target expected to be reached towards the end of 2025.

The P2000 study outcomes are encapsulated below:

Ignoring Pilbara’s fairly rich present valuation, the anticipated project metrics look reasonably attractive with the caveat that a pre-feasibility studies come with a wide confidence range or greater uncertainty than a full feasibility study.

Pilbara anticipated growth over time now looks like this:

Despite the ostensibly attractive expansion study metrics, these pale in contrast to Pilbara’s current market capitalisation of circa AUD$10 billion.

So the knawing question is: Why now and what does this mean?