Pilbara Minerals is on a hot streak, with the Australian lithium producer’s success in the September quarter allowing it to pay dividends to shareholders for the first time as a publicly listed company.
Increased production and sales generated a significant $783.7 million contribution towards a cash balance of $1.375 billion for Pilbara Minerals in the September quarter.
In a mark of the soaring lithium market, the September quarter saw the company shift lower and higher-grade variations of its spodumene concentrate product to meet demand.
In last week announcing details of its capital management framework, Pilbara Minerals said it continued to benefit from positive market conditions for lithium raw materials, underpinning strong operational performance which has resulted in the significant build in cash balance.
The framework prioritises allocation of capital to maintaining safe and reliable operations, as well as near-term productivity initiatives designed to maximise cash generated from existing operations.
Net operating cash flow generated should then be allocated to:
- sustaining capital to maintain operational performance
- further investment into sustainability commitments and initiatives
- establishing and maintaining balance sheet strength to protect the company through all commodity
- price cycles (inclusive of prudent gearing ratios)
- paying a sustainable dividend to shareholders, with a target dividend payout ratio of between 20–30 per cent of free cash flow.
Excess cash flow beyond these priorities could be allocated to further investment to improve the company’s operations, investment in organic and inorganic growth and acquisitions opportunities, debt reduction and/or further returns to shareholders.
Having utilised all prior year tax losses, Pilbara Minerals will start paying income tax in February 2023. This means the company is expecting to apply the target dividend payout ratio of 20–30 per cent of free cash flow for the first time to pay a fully franked dividend for the 2023 financial year.
Pilbara Minerals managing director Dale Henderson said the strong dynamics being experienced for the lithium materials market and healthy production profile quickly transformed the financial position of the business.
“With this comes the opportunity to bolster the growth path for the business and provide improved long-term value return for our shareholders, many of whom have stayed the course through both our ups and downs,” he said.
“With strong cashflows being generated, it is pleasing to be in a position to seek to return value to our shareholders so early in our operational life via a maiden fully franked dividend.”