The Pilbara Minerals Ltd (ASX: PLS) share price is in the green on Wednesday on news of the company's lithium offtake pricing and its project expansions.
The S&P/ASX 200 Index (ASX: XJO) lithium favourite announced good news of pricing with major offtake customers and updated the market on its expansion activities.
The Pilbara Minerals share price is up 2.85%, trading at $3.97 at the time of writing.
Let's take a closer look at today's news from the ASX 200 lithium producer.
What's driving the Pilbara Minerals share price today?
Offtake pricing increased
Pilbara Minerals today revealed an increase in the price it will sell its lithium products to major offtakers.
Its new average price will equate to around US$6,300 per dry metric tonne (CIF China) on a SC6.0 (6% lithia content) equivalent basis, based on today's market pricing reference data.
The increased pricing applies to all shipments the company sends to its major offtake customers from December.
For reference, Pilbara Minerals' realised sales price over the September quarter equated to a reference price of US$4,813 per dry metric tonne on a SC6.0 basis.
Meanwhile, its latest Battery Materials Exchange auction heralded a bid equivalent to US$8,299 per dry metric tonne, inclusive of freight, on a SC6.0 basis.
Pilbara Minerals CEO and managing director Dale Henderson commented:
The improved pricing outcomes are expected to further improve cash-flow generation from the Pilgangoora Project, helping the business to continue on its rapid growth trajectory into 2023 and beyond.
Pilgangoora expansion update
The Pilbara Minerals share price might also be getting a boost from news of its expansion project.
The P680 expansion project aims to increase Pilgangoora's annual nameplate production capacity from around 580,000 tonnes to 680,000 tonnes. The company green-lit the project in June.
Today, however, the company announced the expected cost of the expansion has jumped 36%. It's now expected to cost around $404 million – up from previous estimates of $297.5 million.
That's mainly due to higher material and equipment costs, costs to maintain its delivery schedule, greater engineering work, and a tight labour market. Henderson said:
Our strong balance sheet and the current cash generating capacity of the Pilgangoora Project enables the company to continue the timely delivery of the P680 project, notwithstanding the capital escalation.
The expansion's primary rejection facility is on track for completion in the 2023 September quarter. After that, the crushing and ore sorting facility is expected to kick off in the 2024 March quarter.
Finally, Pilbara Minerals has approved $38.3 million of pre-final investment decision funding for the P1000 Expansion Project.
The expansion could see the Pilgangoora Project's total spodumene concentrate production capacity reach a million tonnes annually. A final investment decision has been flagged for the upcoming March quarter.