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Pilbara ups stage-1 CapEx for Pilgangoora lithium project by 17% to A$274M

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Pilbara ups stage-1 CapEx for Pilgangoora lithium project by 17% to A$274M

Pilbara Minerals Ltd. increased the CapEx estimate for the stage-one development of its Pilgangoora lithium property in Western Australia by 17% to A$274 million.

A September 2016 definitive feasibility study on the project pegged initial CapEx at A$214 million, also outlining a posttax net present value of A$709 million and an internal rate of return of 38.1%, with a 2.7-year payback period.

The ASX-listed company said Dec. 13 that the updated CapEx reflects proposed engineering, procurement and construction contract acceleration costs, scope changes at the company's direction and further investment to add value to the final Pilgangoora concentrate quality.

The increased CapEx also includes A$4.5 million for road improvements to support larger truck formats.

The company aims to start transporting a direct shipping ore, or DSO, product from April 2018 ahead of commissioning in the second quarter and initial lithium concentrate production from June 2018. Discussions on DSO sales are ongoing and subject to final binding agreements.

Pilbara Minerals plans to fund the additional investment from existing sources such as project contingency, management reserve and previously raised equity capital, along with DSO product sales and customer prepayments.

Managing Director and CEO Ken Brinsden said the additional capital is an investment both in near-term benefits to be generated by DSO sales and longer-term benefits of a first-tier spodumene concentrate operation with the ability to rapidly scale up to meet demand.

"Demand for DSO products reflects the current shortage of lithium units in China," Brinsden noted. "We are in a position to meet this demand in the near term through a DSO program which will facilitate further investment in downstream processing capacity in China, that will ultimately benefit our longer-term spodumene concentrate business."