Commodities | Oct 28 2025
This story features PLS GROUP LIMITED.
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The US-Australia critical minerals investment agreement has driven lithium miner Pilbara Minerals’ share price on sentiment, well above fundamentals, on most assessments.
- US-Australia critical minerals deal sends miner share prices surging
- Pilbara Minerals posts solid September quarter beat
- Lithium prices remain below new production threshold
- Most brokers see Pilbara Minerals as overvalued
By Greg Peel
The much anticipated, belated face to face meeting between Prime Minister Albanese and President Trump was hailed a raging success, with the lever of joint rare earth and other critical minerals investment deftly pulled, as expected.
The agreement has since put a rocket under the share prices of relevant miners, particularly rare earth miners but also others in the wider spectrum of critical minerals, including lithium miner Pilbara Minerals ((PLS)).
Throw in a slight rise in otherwise wallowing lithium prices recently plus an impressive September quarter production and sales report and Pilbara Minerals’ share price has risen 45% year to date compared a 10% rise in spodumene prices and 4% for Chinese lithium carbonate prices.
Is this justifiable? The jury is somewhat out.
Record Recoveries
Pilbara Minerals’ September quarter production of 225kt was a 6% beat to consensus and 2% higher quarter on quarter, reflecting a stable performance from the optimised Pilgan plant post the P1000 project, Macquarie notes.
Lithium recovery saw a significant step-up to a record 78.2%, from 71.6% in the June quarter, which was attributable to its ore-sorting facility — a key positive in Macquarie’s view as it also presents upside to future spodumene output growth and unit cost reduction.
Adding to the impressive performance was a -13% quarter on quarter fall in unit operating costs, alongside a 20% increase in realised prices.
The key downside, Ord Minnett suggests, and a result of the soft pricing environment for lithium overall, was a reduction in the company’s cash balance of -$122m, although that fall shrinks to -$72m if a build-up in working capital is excluded.
After removing working capital adjustments and pricing adjustments, the miner still made a loss of -$40m, Citi notes, even at a record low unit cost.
With unit costs expected to pick back up for the remainder of the year, Pilbara is focusing on optimising at the lowest cash burn until spodumene concentrate prices recover.
Navigating A Volatile Environment
Pilbara Minerals continues to navigate a volatile lithium market environment, Bell Potter notes, through several initiatives targeting cash preservation during the current weaker lithium price environment. At Pilgangoora, cost reduction and operational enhancements include the transition to an owner-operator mining fleet and the processing of higher levels of lower grade ore.
At its South Korean lithium hydroxide facility, the miner and joint venture partner POSCO have agreed to moderate production in the short term. While Train 2 delivered first customer certification in the quarter, Macquarie notes the POSCO JV operated with a lower run-rate and the full-year spodumene offtake was reduced to circa 150kt.
Macquarie believes this indicates the plant is not generating a positive margin in the current price environment.
Pilbara Minerals continues to advance earlier stage projects (Colina Project in Brazil, P2000 expansion and mid-stream demonstration plant at Pilgangoora, downstream conversion partnership with Ganfeng), preparing itself to capture value on what Bell Potter expects will be stronger lithium markets over the long term.
Despite beats across the board on September quarter metrics, management has retained FY26 guidance. Notably, unit cost guidance was maintained despite the 7% beat in the September quarter, with management assuming some negative seasonal impact on operations from the wet season and a decline in recoveries from the increased use contract (low grade) ore at the plant.
Too Rich?
Morgan Stanley has to date provided only a bullet point update, outlining quarter metrics without qualification, other than an unchanged impact to the broker’s thesis. Morgan Stanley retains an Overweight rating.
Canaccord Genuity notes recent developments in US policy have provided support in the critical minerals space, which have supported valuations of equities exposed to those sectors, including lithium. Ultimately, the US-Australia agreement will see both governments invest at least US$1bn into critical minerals projects to help reduce the West’s reliance on Chinese supplied materials/products.
Given China’s dominance in the downstream lithium market, Canaccord believes this could present further support for lithium companies, in particular companies with technology or operational excellence. This view supports Canaccord’s unchanged Buy rating.
Macquarie agrees government support for a critical minerals framework could shift Pilbara Minerals’ investment thesis but timing is uncertain. Macquarie sees the stock as fully valued given an implied spodumene price in excess of US$1,200/t, with current spot around US$850/t.
Citi points to management comment at the conference call that the restart of the company’s Ngungaju project would require sustained spodumene carbonate pricing above US$1200/t.
Citi retains a Neutral rating, while Macquarie has downgraded to Neutral from Outperform.
While Pilbara Minerals benefits from a strong balance sheet and its high-quality Pilgangoora asset, Morgans believes its share price has moved well ahead of fundamentals.
This broker argues the recent rally appears sentiment-driven, following firmer lithium prices and the Australia and US critical minerals partnership, from which near-term benefits remain limited at this stage.
Policy developments are likely to drive volatility, and despite a minor price recovery, current price levels remain insufficient for robust cash generations. With the market oversupplied in the medium term, Morgans sees the risk of an equity retracement and has subsequently downgraded to Sell from Hold.
Bell Potter also has downgraded to Sell from Hold following recent strong share price appreciation. Bell Potter holds a positive long term lithium market outlook and acknowledges Pilbara Minerals’ market-leading position and growth optionality.
However, the broker believes current market valuation implies a spodumene carbonate index price of over US$1,400/t into perpetuity; see also Macquarie’s assessment earlier.
UBS still expects a US$1,100/t price in 2026, but despite this forecast, and a belief that Pilbara Minerals remains the best positioned to capitalise on a recovery in prices, UBS struggles for valuation support and hence retains a Sell rating.
Ord Minnett states simply it maintains a Sell recommendation on valuation grounds.
Diverse Targets
Given the number of variables that inform a broker’s valuation of a mining company, it is not unusual to see a wide range of valuations and thus target prices. Pilbara Minerals is no exception.
Ord Minnett is the only aforementioned broker not to increase its target on the back of the strong September quarter. Noting that at the time of writing, the shares were trading at $3.17, Ord Minnett retained a $1.35 target.
Some target increases were quite substantial. Citi, for one, increased to $3.25 from $2.20 to be the top marker among the seven brokers monitored daily by FNArena covering Pilbara Minerals.
The average target among these brokers is now $2.61, up from $2.26.
More positive is Canaccord Genuity, with a target increase to $3.30 from $3.00.
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