One of the best performers in morning trade on Friday has been the Pilbara Minerals Ltd (ASX: PLS) share price.
At the time of writing the lithium miner's shares are up 6% to 89.5 cents.
Why are Pilbara Minerals' shares surging higher?
This morning Pilbara Minerals released the results of its definitive feasibility study (DFS) for the Stage 2 5Mtpa Pilgangoora Lithium-Tantalum project.
According to the release, the DFS outlined a compelling case for the expansion to proceed following recent commissioning of its Stage 1 2Mtpa facility.
The study found that the project had a net present value of $2.16 billion, with life of mine project revenue estimated to be $12.2 billion and life of mine EBITDA of $6.3 billion.
Management believes the expansion will be a globally cost competitive operation producing between 800,000 – 850,000 tonnes per annum of high-quality spodumene concentrate over its 17-year mine life.
One slight negative, though, was that there has been an increase in the estimated capital costs from $207 million to $231 million and life of mine cash operating costs of US$263 per tonne.
Should you invest?
I think that this was a great result for shareholders and I'm not surprised to see its shares rise on the news.
However, whether Pilbara Minerals will be a good investment or not depends largely on the price of lithium over the medium and long-term.
The shares of lithium miners including Pilabra, Galaxy Resources Limited (ASX: GXY), and Orocobre Limited (ASX: ORE) have come under pressure this year due to concerns that lithium prices could sink lower in the medium term due to increasing supply.
While I remain optimistic that demand will continue to outstrip supply long into the future, if it doesn't then the lithium miners could continue to sink lower. Because of this, I think they are high risk investments that are largely unsuitable for the average investor.
