The Pilbara Minerals Ltd (ASX: PLS) share price is under the spotlight after reporting its FY25 first quarter update.
Pilbara Minerals is one of the largest lithium miners in Australia.
FY25 first quarter update
The ASX lithium share reported that its FY25 first quarter (September 2024) production was 220.1kt, it declined by 3% compared to the June 2024 quarter.
Management said this reduction was “anticipated and reflected the reduced plant availability resulting from the integration and ramp up of the P680 crushing and ore sorting facility.”
The miner said that the realised price that it sold its commodity for in the September 2024 quarter was US$682 per tonne, which was 19% lower than the June 2024 quarter. In volume terms, the Pilbara Minerals’ sales declined by 9% quarter on quarter to 214.5kt.
Lower sale volumes and a lower price meant that revenue sank 31% to $210 million compared to the prior quarter. That’s not appealing for the Pilbara Minerals share price.
Pilbara Minerals reported that its unit operating costs in free on board (FOB) Port Hedland excluding freight and royalties terms rose 3% quarter on quarter to A$606 (US$406) per tonne. Unit operating costs (CIF China) including freight and royalty costs fell 2% to A$717 (US$480) per tonne.
The costs per tonne rose because of “lower sales volume against lower total production costs and continued focus on cost reductions.”
The mining company’s cash balance declined 17% over the quarter to A$1.4 billion.
Pilbara Minerals also said that its P1000 project is over 80% complete. Construction works have continued to the schedule including the installation of steel modules, pipe racks and thickeners and all major equipment is on site ready for installation.
Cost management
Pilbara Minerals said there is continued ongoing focus on prudent cost reduction initiatives. In response to lithium market conditions, its Pilgangoora operation will be managed to optimise the higher-performing, lower-cost Pilgan plant.
The ASX lithium share said it’s temporarily placing the Ngungaju plant into care and maintenance to reduce costs and further strengthen the company’s financial position.
The miner said the ‘optimisation’ of the Pilgangoora operation will result in a “modest reduction” to production volume of around 100kt of spodumene concentrate (raw lithium) in FY25 compared to previous guidance.
This shift will enable a “significant” cash flow improvement of approximately $200 million compared to its previous operating model.
Final thoughts on the Pilbara Minerals share price
Reducing production is the right call, in my opinion. The ASX lithium share needs to take care of its commodity deposit and the overall project to maximise the lifetime profitability.
Pilbara Minerals is part of the problem of global lithium supply and has helped push down the lithium price, which is now harming its profitability.
There are other ASX growth shares I’d rather buy at this stage, but I think this move makes Pilbara Minerals shares more intriguing.
