04/09/2019 - 12:23

Pilbara raising over $91m to weather tough market

04/09/2019 - 12:23

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Pilbara Minerals has undertaken a $91.5 million capital raising, underpinned by China’s largest manufacturer of electric vehicle batteries, as it seeks to strengthen its balance sheet amid a downturn in the lithium sector.

Ken Brisden says the capital raising comes at a formative time in the company’s development.

Pilbara Minerals has undertaken a $91.5 million capital raising, underpinned by China’s largest manufacturer of electric vehicle batteries, as it seeks to strengthen its balance sheet amid a downturn in the lithium market.

Pilbara emerged from a voluntary ASX suspension to announce that Contemporary Amperex Technology would invest $55 million in the company via a share placement, equating to an 8.5 per cent stake.

CATL is responsible for between 40 per cent and 55 per cent of China’s EV battery production, and supplies to manufacturers including Toyota, BMW, Volkswagen and Honda.

Pilbara said it would raise an additional $36.5 million from institutional and sophisticated investors, also through a share placement.

Macquarie Capital was the lead manager to the placements.

Shares were issued in both sets of placements at 30 cents, a 14.3 per cent discount to its previous closing price of 35 cents per share on August 28.

This was its lowest closing price in around 2.5 years, and shares in Pilbara were trading at 81 cents each just one year ago.

Additionally, Pilbara said it would conduct a share purchase plan, at the same price as the placements, for up to $20 million.

Pilbara said the equity raisings would boost its finances as it ramps up to nameplate capacity at its Pilgangoora lithium project, assist in funding its 21 per cent stake in a proposed downstream processing joint venture with South Korea’s POSCO, and enable revised studies of the stage two expansion of Pilgangoora.

Managing director Ken Brisden said the capital raising came at a formative time in the company’s development.

“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,” he said.

“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.”

The company expects to produce between just 20,000 and 35,000 dry metric tonnes of lithium concentrate this quarter, compared to 63,782 dry metric tonnes for the June quarter.

However, it only shipped 43,214 dry metric tonnes in the June quarter, as a supply glut grips the lithium market and forces producers like Pilbara to stockpile its product.

Last month, the company halted an attempt to offload up to a 49 per cent stake in its Pilgangoora lithium-tantalum project, after it could not find a buyer at its asking price.

Instead, it executed a binding joint venture agreement with South Korean offtake partner POSCO.

Pilbara was set to use the funds from the sale to help fund its $231 million stage two expansion.

It will now divide the stage two development into incremental stages.

It will outlay between $60 million and $70 million in the first sub-stage to deliver an expected additional 100,000tpa of lithium concentrate.

Shares in Pilbara remain in a trading halt at 35 cents each.

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