Pilbara Minerals raises US$62.7m in equity

AUSTRALIAN lithium mining company Pilbara Minerals has raised A$91.5m (US$62.7m) in equity. The total amount includes an agreement with China’s Contemporary Amperex Technology (CATL), an energy storage company, for A$55m in exchange for an 8.5% stake.

The equity raised is to be used to help strengthen Pilbara’s balance sheet, to provide increased working capital during the ramping up of the Pilgangoora Project to “nameplate” capacity, and to fund the company’s participation in the POSCO Downstream joint-venture (JV). POSCO is a South-Korean steelmaking company.

On 5 September, Pilbara completed its efforts to raise A$36.5m from existing shareholders and new investors, which includes several large institutions. In total, approximately 121.7m shares were involved, equivalent to about 6.6% of shares on issue.

CATL is China’s largest electric vehicle (EV) lithium-ion battery manufacturer and the company has strong existing relationships with leading EV manufacturers, including BMW, Honda, Toyota, and Volkswagen.

As part of the agreement with Pilbara, CATL has indicated a willingness to provide the company with commercial support by purchasing spodumene concentrate product, a lithium source. In addition, Pilbara could benefit from CATL’s “technical and strategic expertise and financial capacity”. CATL could also broaden Pilbara’s exposure to a wide range of investors, financiers, and other commercial partners. Furthermore, CATL may be able to assist with feasibility studies and further development projects.

In recognition of this strategic relationship, CATL has been granted certain rights by Pilbara, including Board representation. CATL can nominate one person for appointment to Pilbara’s Board as a Non-Executive Director.

CATL has agreed to provide Pilbara with a A$5m deposit to show its commitment to the investment, and its confidence in the closing of the investment. No closing date was given.

According to the Financial Times, the deal with CATL represents a “vote of confidence” in the lithium sector, which has recently experienced falling prices. It reports that the sector has faced a difficult year and the price for its main product, lithium carbonate, has fallen 17%, according to Benchmark Mineral Intelligence.

Further to the A$91.5m equity-raising effort, Pilbara aims to raise up to an additional A$20m from “eligible shareholders,” bringing the total equity investment to A$111.5m. Shares are to be offered “shortly,” Pilbara said on 5 September. Shareholders will be allowed to invest a maximum of A$30,000 each.

Ken Brinsden, CEO and Managing Director of Pilbara Minerals, welcomed the company’s new investors.

“While there has been commentary talking down the current state of lithium markets, it has belied the significant interest we have continued to see from the strategic players in the lithium-ion supply chain and their focus on lithium raw material supply. In particular, the focus is on the quality and security of the lithium raw material supply and matching the raw material demand growth to growth downstream in the lithium-ion battery supply chain.

“These factors have continued to influence our thoughts on the company’s future growth and funding mechanisms.”

Of the deal with CATL, he said: “The CATL partnership further diversifies Pilbara Minerals’ strategic shareholder base, adding a battery manufacturer to the existing converters, and aligns Pilbara Minerals with a key player in the battery market with a robust balance sheet to support our long-term growth trajectory.

“This relationship further enhances Pilbara Minerals’ downstream integration strategy, which remains a key focus for us given the recently announced execution of binding terms for the downstream POSCO joint venture in South Korea.”.

He added: “CATL’s investment is a strong vote of confidence in the quality of Pilbara Minerals’ Pilgangoora Project, its important role as a cornerstone supplier in the global lithium-ion supply chain and the growth of the industry in both the medium and long-term.”

Pilbara’s Pilgangoora Lithium-Tantalum Project (Pilgangoora Project), located in Western Australia, is one of the biggest new lithium ore (spodumene) deposits in the world. The company is currently ramping up the project to nameplate capacity. It is to increase processing capacity to 7.5m t/y, which will allow the project to deliver 1.2m t/y of about 6% spodumene concentrate and 1.1m t/y of 30% tantalite concentrate to market, over a 17-year mine life.

Pilbara has an initial 21% equity interest in the proposed POSCO Downstream JV, which involves a primary lithium hydroxide downstream chemical processing facility in South Korea. The facility will process spodumene from the Pilgangoora project and further integrate Pilbara into the downstream value-add supply chain. According to Brinsden, the JV remains a central part of Pilbara’s growth strategy and its recent agreement with CATL does not impact its existing JV commitments.