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Lithium price slide: Pilbara Minerals warns of dividend cut

Pilbara Minerals (ASX:PLS) has warned investors not to expect an interim dividend as it grapples with the slide in lithium prices that has seen the value of its spodumene production slashed by up to 80%.

The company paid its first dividend a year ago, 11 cents a share, and followed it up with a final dividend of 14 cents, totaling 25 cents a share, even as world lithium prices were falling.

While it says it’s unlikely an interim dividend will be paid (based on the formula it uses, there’s a small chance a much smaller interim dividend could be paid), unless there’s a big move upwards in lithium and spodumene prices in the next few months, a final dividend for the year to June would be looking fraught.

The company lowered its FY24 CAPEX guidance from $875-975 million to $820-875 million, down 8.4% at the midpoint, which was a small cut given the size of the drop in prices.

The realized price for its spodumene was $1,113 a tonne, down 50% quarter-on-quarter.

Importantly, while the cash balance of $2.1 billion was down 29% from the September quarter, it was only slightly less than the $2.2 billion at the end of 2022.

Pilbara had given a big hint of the emerging downward pressures on its business from the price slide in its September quarterly report when it revealed it was abandoning any idea of capital management moves (a buyback or bonus dividend).

Besides ruling out a dividend, Pilbara said it was still committed to its P680 and P1000 projects but scaled back on any non-essential spending, as have every miner in lithium, nickel, copper, etc.

Now the brief idea of an interim distribution had been abandoned for the time being, and the shares jumped more than 6%!

The company reported revenue of $263 million for the December quarter, down 46% on the previous three months despite higher production.

For the three months to December, the company reported spodumene production of 176,000 tonnes, up 22% quarter-on-quarter and above the 162,000 forecast and higher than the December 2022 quarter’s 162,151 tonnes.

Spodumene shipments of 159,900 were up 9.3% quarter-on-quarter but below the 166,400 expected by the market but also nicely above the 148,622 tonnes in the year-ago quarter.

Operating costs FOB of $639 a tonne were down 14% quarter-on-quarter, while revenue of $264 million was down 46% quarter-on-quarter. For the six months to December, revenue slumped 65% to $757 million from $2.18 billion.

That was the best evidence of the impact of the price slump on a producing company, let alone a wannabe explorer or someone like Core Lithium who is just starting out. The average price for the latest half was $1,645 a tonne, down 45% from $4,993 a year earlier.

Depending on which cost measure you use – CIF or FOB, it’s likely Pilbara Minerals made a small loss in the six months to December, but the full financials won’t be out until late next month.