Under the leadership of new managing director and chief executive officer Dale Henderson, Pilbara Minerals is becoming one of the world’s most important lithium companies. So what’s next?
Pilbara Minerals is a mining company at its core, but every technological advancement sees it growing into something more.
The lithium miner has established commercial partnerships with the primary goal of further evolving and connecting the lithium supply chain. Its recent joint venture (JV) with Calix is a key example of this.
In June, Pilbara Minerals signed a binding memorandum of understanding (MoU) with the technology company to support the development of a new ‘midstream’ lithium chemicals opportunity.
The MoU paves the way for Pilbara Minerals and Calix to form a JV and develop a demonstration plant at the Pilgangoora project in Western Australia, with the aim of producing lithium salts via an innovative refining process.
If successfully developed and proven, the new process could mean spodumene concentrate could be replaced by a higher-grade lithium salts product.
The Calix JV was initiated under the leadership of former Pilbara Minerals managing director and chief executive officer (CEO) Ken Brinsden, but Brinsden’s successor has an equally – if not more – important role to bring the project to life.
And there couldn’t be a more capable person to carry the torch.
Pilbara Minerals’ chief operating officer from 2017 until his appointment as CEO in June, Dale Henderson was promoted following a wide-ranging and thorough search process that commenced in February.
The company said Henderson was selected given his “strong lithium industry experience, outstanding leadership skills, strong cultural values and work ethic”.
Henderson told Australian Resources & Investment that he has experienced several “baptisms of fire” throughout his career, with his work in the Middle East with Occidental Petroleum particularly challenging.
Prior to joining Pilbara Minerals, Henderson held senior leadership roles with Fortescue Metals Group (FMG) in mine operations and project development. This proved a seminal experience.
“(FMG) was quite the environment when I was there in terms of both a growth challenge quickly followed by a cost-down challenge to get the debt down and survive a downturn in the iron ore market,” he said.
“I was present during both of those chapters, so they were very formative (for me) and for many of the people who were part of the business during those periods.”
Henderson said these experiences positioned him well to support the materialisation of Pilbara Minerals from explorer into producer.
“It was a combination of those things that set me up to be very useful for Pilbara, where they needed a combination of someone who can convert the designs into a physical asset that is successful and bring that operating expertise,” he said.
“That was no small task, and big credit to the team who made that all successful.”
When Henderson was appointed as Pilbara Minerals’ chief operating officer in September 2017, Pilgangoora was still in its early stages of development.
This meant Henderson had the opportunity to be a key player in various projects and responsibilities across different areas of the business in order to elevate Pilgangoora into production.
“What’s followed in my time with Pilbara has been building out some of the corporate aspects that we’ve had to achieve,” he said.
“We’ve done various debt refinancing, various new offtake agreements, the downstream JV with POSCO and, being a small executive team, I’ve been knee deep in all of that.”
After successfully commencing plant commissioning in the second quarter of 2018, Pilbara Minerals shipped its first spodumene concentrate from Pilgangoora in October of that year.
Henderson said being present during such a formative period for the company enabled him to commence the CEO role with knowledge and understanding of the company’s journey to this point, and how those experiences will propel it into the future.
“Taking the CEO baton forward – it’s a step up in role, as you’d expect – but in many ways I have some confidence in doing that given that history and given it’s coming up to five years that I’ve been with the business,” he said.
“I know where all the broom cupboards are. I know the background to a lot of the reasons for all the choices we’ve made, and I know all the customers.
“All of those things put me in good stead to give it a red-hot crack and do the best I can as the new custodian of the CEO role for this next chapter.”
Alongside the Calix JV, which has the additional backing of a $20 million grant from the Australian Government as part of the Modern Manufacturing Initiative (MMI), Pilbara Minerals is also advancing its downstream JV with POSCO.
Having completed the JV in April, the two will share interest (Pilbara Minerals 18 per cent, POSCO 82 per cent) in a 43,000-tonne-per-annum (tpa) lithium hydroxide conversion facility in Gwangyang, South Korea.
Major construction on the facility was planned to commence from the June quarter of 2022, with construction of the first train of the conversion facility to be completed by mid-2023 and the second train to be completed approximately three months later.
Production is set to commence from the second half of 2023, and Pilbara Minerals will supply 315,000tpa of its spodumene concentrate product from Pilgangoora for processing at the facility.
“We’re really proud of our involvement with POSCO,” Henderson said. “It was four-and-a-half years’ worth of work in consummating that joint venture, and what it means for Pilbara and our shareholders is we’re a part owner in a lithium chemical conversion plant in South Korea.
“That domicile is a great place to be setting up. That’s the doorstep of the existing battery makers – LG Chem, SK Innovation, and the like.
“Then to be partnered with POSCO, who’s a giant globally, but certainly a giant in South Korea, and they’re very progressive in battery materials. So we think it’s a bit of a slam dunk in terms of a partner and a project to be a participator in.”
In late June, Pilbara Minerals made a final investment decision (FID) to increase the project’s production capacity from 580,000 to 680,000tpa of spodumene concentrate (P680 project).
Henderson said this expansion speaks to the staged growth profile Pilbara Minerals has always contemplated for Pilgangoora, with the aim of eventually boosting capacity to one million tonnes per annum – and potentially beyond.
Another FID planned in 2022 aims to add a further 100,000tpa of capacity, bringing the project to a 780,000tpa production profile.
“We have another FID contemplated for late in the year which will be the next step up to the (one) million tonnes per annum – or the P1000 (project), as we call it,” Henderson said.
“(The recent FID) was really in two parts. One was the piece which gave us the 100,000tpa, the other part was pre-investment in the combined crushing and ore sorting facility which is sized for that P1000.
“So a big part of the capex (capital expenditure) is attributed to that investment and we’re keen to get that going and done because that basically lays out some of the infrastructure for that ultimate expansion.”
The P680 project will require the construction of both a primary rejection-heavy media separation circuit and an integrated crushing and ore sorting facility, at a total capital investment of $297.5 million.
This includes $50 million of pre-investment capital to support future expansions of the processing capacity.
Commissioning of the primary rejection-heavy media separation circuit is expected to commence from the September quarter of 2023, with the additional production capacity to follow three months later.
At the time of writing (mid-July), lithium carbonate and hydroxide prices were trading 376 and 359 per cent higher, respectively, than a year prior according to leading lithium consultancy Benchmark Mineral Intelligence.
However, some analysts have forecast supply surpluses in the coming years. The Bank of America recently suggested this could occur as early as 2023, while Credit Suisse said it could occur by 2025.
Goldman Sachs has also been bearish about the commodity’s outlook, suggesting there had been “a surge in investor capital into supply investment tied to the long-term EV (electric vehicle) demand story, essentially trading a spot-driven commodity as a forward-looking equity”.
“That fundamental mis-pricing has in turn generated an outsized supply response well ahead of the demand trend,” the company said.
When asked about lithium’s outlook, Henderson said the commodity’s strong pricing and lack of supply coming to market made for a positive short-term outlook.
He said demand was also looking strong in the short-term due to the continued evolution in EV technologies and rising EV sales.
The mid-term, however, is more complex.
“(The mid-term) is where new supply will be coming to the table,” he said.
“The question is, at that point in time, what has the demand picture evolved to? And that’s really hard to (predict).
“Many commentators are projecting very strong demand and strong demand outstripping supply. It’s hard to disagree with that when you look at the rate of investment and you look at the challenge that raw materials have in terms of bringing things to market successfully.
“So, mid-term, I still feel fairly positive around that but the thing which puts it beyond doubt is making sure that, as a supplier, we’re a low-cost producer. And that’s of course a key focus for us.
“As we move through our expansion and optimise that facility again, we will be well down the cost curve and so whenever those inevitable market cycles emerge, we will weather those storms and won’t be positioned on the right-hand side of that cost curve.”
With a credentialed new CEO, a proactive approach to cost management, and several new projects in the works that extend the company’s capacity beyond just a miner, Pilbara Minerals is well placed to not only capitalise on the current lithium rush but also solidify itself if any future headwinds do occur.
Over to you, Henderson.
This feature appeared in the August issue of Australian Resources & Investment.