Pilbara Minerals seals another Chinese offtake deal

Australian lithium producer Pilbara Minerals (ASX: PLS) has clinched a deal with Chinese company Sichuan Yahua Industrial Group for spodumene concentrate, essential for making lithium batteries.

Under the agreement, Pilbara will deliver 20,000 tonnes of the mineral from its Pilgangoora operation in Western Australia this year and 100,000 tonnes annually in 2025 and 2026, with an option to supply an extra 60,000 tonnes each year, according to the Perth-based company’s March 12 news release.

“This offtake builds on an established relationship between our companies, having previously completed a number of sales together,” Pilbara managing director and CEO Dale Henderson said in the release.

As Australia’s largest independent lithium miner, the new offtake comes on the heels of Pilbara in January increasing its sales contract with another Chinese company, Ganfeng Lithium, over the next three years and has the option to boost the spodumene concentrate tonnage sold to the major. In February, it amended a spodumene supply deal with chemicals producer Chengxin Lithium Group, raising agreed sales volumes and extending the contract’s duration.

Pilbara says the spodumene will be sold at market prices at the time of each delivery. Prices for lithium carbonate, a precursor to lithium hydroxide used in batteries, have fallen sharply in the past 12 months. Lithium carbonate fetched about $15,653 per tonne as of Wednesday, down from about $23,658 in September and 80% lower than in 2022, according to Trading Economics.

Yahua, known for its stature in the lithium market, serves major clients like Tesla and LG Chem, establishing itself as one of the leading lithium hydroxide producers.

The scale and quality of the operation have attracted a consortium of high-profile global partners, including POSCO, Ganfeng, General Lithium, Yibin Tianyi, Chengxin Lithium and Yahua.

Pilbara is focusing on enhancing the value of its hard rock spodumene ore to expand its business. The company is establishing a demonstration plant at Pilgangoora to process lithium. According to the company, if this technology utilizes renewable energy, it could reduce carbon emissions by over 80% during one of the most energy-intensive phases of lithium battery material production.

Additionally, the plant aims to support Pilbara in achieving a production target of 1 million tonnes of spodumene concentrate by next year.

Pilgangoora hosts proven and probable reserves of 214.2 million tonnes grading 1.19% lithium oxide for 2.5 million tonnes of lithium. The resource base across all categories totals 413.8 million tonnes grading 1.15% lithium oxide for 4.8 million tonnes of metal.

Pilbara shares closed Wednesday at A$4.18 apiece in Sydney, giving the company a market capitalization of A$12.6 billion ($8.3 billion).