Pilbara Minerals’ Pilgangoora mine in Western Australia is the world’s second-largest hard rock lithium operation and consists of two operating plants, Pilgan and Ngungaju. Pilbara (PLS) also recently acquired a Brazilian hard-rock project from Latin Resources.

Pilbara’s March 2025-quarter revenue of $150 million fell 30% compared with the December 2024 quarter. Lower volumes from the Pilgan ramp up and the first full quarter with the Ngungaju plant mothballed outweighed 7% higher realized lithium prices.

Pilbara is on track to meet fiscal 2025 production and cost guidance. However, the lithium market is more challenged than we previously thought. Electric vehicle sales growth has stalled in the US and Europe, keeping lithium oversupplied.

We temper our lithium price recovery trajectory, materially downgrading our near-term forecast. We now expect prices to reach USD 20,000 per metric ton by the end of calendar 2026, down from USD 25,000 previously. Despite the slow recovery, our midcycle price remains USD 15,000.

Pilbara shares remain materially undervalued

The main valuation driver for Pilbara Minerals is the lithium price. As a result, we cut our fiscal 2026 and fiscal 2027 earnings per share estimates to $0.07 and $0.22, respectively, from $0.20 and $0.48, previously. Our fiscal 2025 EPS estimate for a loss of $0.02 is little changed.

We cut our fair value estimate for narrow-moat Pilbara by 12% to $3.00, primarily reflecting weaker expected medium-term lithium prices and earnings. Pilbara’s full ownership of the Pilgangoora mine accounts for about 85% of our valuation. The Latin Resources acquisition comprises the other 15%.

The shares continue to look materially undervalued and while the near-term challenges persist, our positive long-term view is intact.

We expect EV sales to reaccelerate and lithium companies to benefit. Supply growth is set to slow in the near term, and we expect the market to return to balance and support higher prices as demand recovers.

Strong balance sheet and cost advantage boost confidence

Pilbara’s balance sheet remains in excellent shape, with $1.1 billion in cash and a net cash position of $700 million as of March 2025. With major projects pushed back and reduced cash usage, the company is well-positioned to navigate near-term lithium price weakness.

We expect the Ngungaju plant to remain under care and maintenance in the medium term. Global project delays, including Pilbara’s deferral of its 2 million metric ton Pilgan expansion to at least fiscal 2027, should help check the industry’s near-term supply growth.

With a strong balance sheet and suspended capacity, we believe Pilbara is well-placed to respond when prices recover. Especially when you consider the cost advantaged nature of its major asset.

Pilbara’s hard-rock Pilgangoora mine in Western Australia produces lithium spodumene concentrate at a low cost of production, generating economic profits at most lithium prices. With about 20 years left on current reserve estimates, Pilgangoora has sufficient remaining life to warrant a narrow moat.

We estimate that Pilgangoora’s cash costs will average about USD 400 per metric ton over the next decade, which is below our midcycle price forecast for spodumene concentrate of USD 1,200 per metric ton. This places the mine at the bottom end of the hard rock lithium cost curve.

Pilbara Minerals (PLS)

  • Fair Value estimate: $3 per share
  • Moat Rating: Narrow
  • Star Rating: ★★★★★
  • Uncertainty Rating: High

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Terms used in this article

Star Rating: Our one- to five-star ratings are guideposts to a broad audience and individuals must consider their own specific investment goals, risk tolerance, and several other factors. A five-star rating means our analysts think the current market price likely represents an excessively pessimistic outlook and that beyond fair risk-adjusted returns are likely over a long timeframe. A one-star rating means our analysts think the market is pricing in an excessively optimistic outlook, limiting upside potential and leaving the investor exposed to capital loss.

Fair Value: Morningstar’s Fair Value estimate results from a detailed projection of a company’s future cash flows, resulting from our analysts’ independent primary research. Price To Fair Value measures the current market price against estimated Fair Value. If a company’s stock trades at $100 and our analysts believe it is worth $200, the price to fair value ratio would be 0.5. A Price to Fair Value over 1 suggests the share is overvalued.

Moat Rating: An economic moat is a structural feature that allows a firm to sustain excess profits over a long period. Companies with a narrow moat are those we believe are more likely than not to sustain excess returns for at least a decade. For wide-moat companies, we have high confidence that excess returns will persist for 10 years and are likely to persist at least 20 years. To learn about finding different sources of moat, read this article by Mark LaMonica.

Uncertainty Rating: Morningstar’s Uncertainty Rating is designed to capture the range of potential outcomes for a company. An investor can think of this as the underlying risk of the business. For higher risk businesses with wider ranges of potential outcomes an investor should consider a larger margin of safety or difference between the estimate of what a share is worth and how much an investor pays. This rating is used to assign the margin of safety required before investing, which in turn explicitly drives our stock star rating system. The Uncertainty Rating is aimed at identifying the confidence we should have in assigning a fair value estimate for a stock. Read more about business risk and margin of safety here.