Pilbara Minerals Limited [ASX:PLS] is up over 10% in early trade today.Pilbara is a lithium producer that operates a mine in Western Australia.
The company was previously in a trading halt as it prepared to release a significant announcement to the market.
What’s the news behind this price surge?
Pilbara announced that it has a proposed funding package for its ‘Stage 2’ expansion of its Pilgangoora project. This would expand the productive capacity of the mine.
Two of Pilbara’s existing customers are major players in the current lithium industry. The fact that they are prepared to back this expansion with millions of dollars is a strong endorsement for Pilbara and the lithium market in general.
For example, it indicates that they anticipate lots of future demand.
This goes against the current market assessment. Lithium stocks have sold off based on a fear of oversupply since a strong rally in 2017.
Lithium: The ‘oversupply’ myth?
Pilbara CEO Ken Brinsden has maintained all along that the company’s customers were demanding more lithium concentrate than he could currently supply. He maintains that the demand outlook is much stronger than the market assumes currently.
Pilbara’s announcement today would seemingly vindicate this view.
This article is not an endorsement of Pilbara or a recommendation to buy and sell. It’s an observation that lithium stocks in general may be in for a positive 2019 should current trends like this continue.
One idea is to include Pilbara on a watchlist and watch for further announcements to gauge the lithium market in general.