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Pilbara Minerals terminates Pilgangoora minority stake sale, cuts sale guidance

Pilbara Minerals Ltd. said it is no longer looking to sell a minority stake in its Pilgangoora lithium-tantalum project in Western Australia and will develop the stage-two expansion on a stand-alone basis.

The company also cut its sales guidance for the September quarter to 20,000 to 35,000 dry tonnes of spodumene concentrate from the previous guidance of 35,000 to 48,000 dry tonnes. It maintained guidance for the December quarter at 65,000 to 80,000 dry tonnes.

Pilbara Minerals was considering selling a minority interest in the project ranging from 20% and 49% but said the proposals it received did not reflect Pilgangoora's true long-term value.

"The Pilbara Minerals board does not believe the proposals received to date represent an appropriate valuation for substantial ownership of one of Australia's premier, long-life lithium projects, particularly in light of current market conditions," the company said Aug. 27.

Pilbara Minerals now plans to advance its 5 million-tonne-per-annum, stage-two expansion at the Pilgangoora project under a three-phase development plan.

The phased development will reduce upfront capital expenditure for the initial phase, reduce capital risk by facilitating a more flexible approach to expansion over time and allow it to align mine expansion capacity with customers' chemical facilities, the company said.

The first phase will require initial upfront capex of A$60 million to A$70 million and is expected to deliver an additional 100,000 tpa of spodumene concentrate capacity by December 2020.

The second phase will add 40,000 to 50,000 tpa capacity at additional capex of A$20 million to A$30 million, and the third phase will add 330,000 tonnes to 370,000 tonnes of capacity at a further A$140 million to A$150 million of capex. Total capex is estimated at between A$220 million and A$250 million.

The phased build-out will require changes to the process plant, but the power, crushing or logistics facilities will remain as was detailed in the existing second-stage definitive feasibility study. The company intends to complete a feasibility study for the revised development by December.

As part of any final decision for the revised expansion, Pilbara Minerals will reevaluate its funding options to include the expected reduction in upfront capex for the initial development phase.

The funding plans may include a combination of existing cash, future operating cash flows, revised customer prepayments under off-take agreements, or a mix of debt and equity.

Meanwhile, the company plans to keep the proposed stage-three expansion on hold until market demand is sufficient to justify development.

A scoping study in March for the stage-three expansion to increase the overall plant throughput to 7.5 million tpa outlined a posttax net present value, discounted at 10%, of A$3.73 billion.

In a separate same-day release, Pilbara Minerals said it executed a binding terms sheet with South Korean steelmaker POSCO to build a 40,000-tpa lithium hydroxide and carbonate chemical conversion facility in South Korea.

Pilbara Minerals will initially hold a 21% interest in the joint venture, with an option to increase to 30%. The initial investment will be funded through the company's A$79.6 million convertible bond agreement with POSCO.

The existing off-take agreement between the companies for spodumene concentrate will be assigned to the joint venture and be increased to 315,000 tpa from 240,000 tpa for the lesser of 20 years or the life of the project, which will supply the jointly owned chemical facility.

The joint venture will also provide Pilbara Minerals with a secured US$25 million prepayment, which will be used to partly fund the Pilgangoora project's stage-two expansion.

Definitive agreements and board approvals from both companies are expected in the December quarter.