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Pilbara Minerals soars on offtake deal with Chinese

Pilbara Minerals’ share price soared this week on news of offtake agreements at their Pilgangoora Lithium project that will see 100% of production snapped up from stage 1 and up to 50% from stage 2.

Pilbara’s share price jumped by almost 30% after coming out a trading halt last week.

The Perth-based Lithium developer announced that one of China’s largest integrated producers, Jiangxi Ganfeng Lithium, had committed to take 160,000 tonnes per annum of chemical grade spodumene concentrate over a 10-year term, with options to extend for a further 10 years.

With General Lithium Corporation locked in last year for 140,000tpa, Pilbara now have binding offtake agreements for all production from the Stage 1 development of Pilgangoora that will process 2Mtpa.

The breakthrough deal underwrites the revenues to be generated by Pilgangoora and clears the way for the completion of funding and a final investment decision.

Ganfeng have also committed to subscribe for not less than $US20 million in any equity placement by Pilbara Minerals to raise funds for Stage 1.

Ganfeng, which is capitalised on the Shenzhen Stock Exchange at $US4.6 billon, is hungry for even more Lithium from Pilgangoora and has entered offtake and funding deals in relation to the Stage 2 expansion to 4Mtpa.

Upon a decision to develop Stage 2, Ganfeng Lithium will take at least 25% of Stage 2 production. There is an additional deal that could lift this to up to 50% or 150,000tpa, contingent on Ganfeng providing debt funding or pre-payments in line with its offtake commitment.

The new offtake agreements with Ganfeng have an attractive pricing formula based on market benchmarks for battery-grade Lithium Carbonate, and include downside price protections for Pilbara.

Pilbara Minerals’ Managing Director, Ken Brinsden, said the agreements with both Ganfeng and General Lithium underscored the importance of Pilgangoora as a world-class, leading supply solution for burgeoning Lithium raw material demand.

He said; “We are delighted to have reached agreement with one of the world’s pre-eminent and fastest growing integrated Lithium companies, and we welcome Ganfeng as a long-term partner at Pilgangoora. Their investment is a major endorsement for the project and Pilbara Minerals.”

“With the chemical-grade spodumene offtake now completed, the Pilbara team together with our financial advisors, BurnVoir Corporate Finance, are fully focused on arranging the balance of development funding. In that regard, we are well advanced and, with the support of our major customers, we look forward to announcing a successful funding solution in the near term,” Mr Brinsden said.

Pilbara is confident it will soon receive final WA government approval for its mining proposal and is poised to begin major site works for a fast-track development. Construction of a site office and mining camp is already well underway.

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Share Price

Closing price for the last 90 trading days
Source: Morningstar

BN30 Index

Index = 100 as of 4 Jan 2016
Source: Morningstar

Total Shareholder Return as at 31/12/18

1 year TSR5 year TSR
404thMatsa Resources-24%-3%
489thBuru Energy-34%-35%
531stTriangle Energy Global-41%-17%
549thPilbara Minerals-44%120%
716 WA (and selected non WA) listed companies ranked by 1 year TSR relative to other companies with similar revenue
Source: Morningstar

Share Transactions

21/12/18
$0 Issued
19/10/18
$70k Bought
19/04/18
$900k Bought
Total value as at the date of the transaction
Source: Morningstar

Revenue

55th↑Pilbara Minerals$15.3m
56th↑Triangle Energy Global$13.8m
58th↑Buru Energy$12.7m
60th↑Matsa Resources$11.7m
513 listed resources companies ranked by revenue.
Source: Morningstar

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