- Pilbara Minerals has gained Chinese government approval for a major investment from China’s biggest battery maker for electric vehicles
- Contemporary Amperex Technology plans to invest $55 million into Pilbara in two tranches
- $20 million is now approved for investment from the Chinese government, but the remaining $35 million must be approved by shareholders next week
- Today’s news, however, is tainted by a $28.9 million annual loss for 2019, which the company also reported today
- Pilbara shares closed flat at 30 cents per share
Pilbara Minerals has leapt over a major hurdle for its $111.5 million capital raising plan by gaining Chinese government approval for a key strategic investment.
Hong Kong-based Contemporary Amperex Technology (CATL) is set to become a key stakeholder in Pilbara by investing $55 million into the lithium explorer — effectively taking ownership of 8.5 per cent of the company.
CATL is China’s largest battery manufacturer for electric vehicles (EVs) and, according to Pilbara, is considered a world leader in the lithium-ion battery industry.
With Pilbara being transformed into a lithium-tantalum producer over the past year, this is an important investment for the company.
The investment is set to come in two tranches, and the government regulatory approval now paves the way for the first $20 million share placement to CATL.
The remaining $35 million tranche is subject to shareholder approval which will be decided after a general meeting on Wednesday, October 16. Pilbara’s directors unanimously recommended shareholders vote in favour of the placement.
Last month, Pilbara issued 121.7 million new shares at 30 cents per share to raise $36.5 million. An additional $20 million is set to be raised through a share purchase plan.
With the placement, purchase plan, and CATL investment, Pilbara is set to bank $111.5 million. The capital raising will strengthen Pilbara’s balance sheet and provide increased working capital.
Today’s news, however, is coupled with the company’s 2019 financial year annual report, which highlighted a total $28.9 million loss over the year.
While gross profit was just over $6 million, some high operating costs brought the net profit severely down.
Managing Director Ken Brinsden said the market presented some challenges over the year, particularly in the area of spodumene demand and pricing as the Chinese domestic markets readjusts to a new government subsidy regime.
“While not seeking to downplay these challenges, it is important to emphasise the long term fundamentals for lithium raw materials remain strong, underpinned by the global transition to EVs,” Ken said.
He highlighted electric vehicle commitments from major players like BMW, Volkswagen, and Volvo as evidence of this strong long-term market.
The market seems undeterred by both the investment approval and annual loss today, however.
Pilbara shares closed flat at 30 cents each. Pilbara’s market cap is valued at $601.98 million.