PLS has released a pre-feasibility study outlining the potential to expand production capacity at Pilgangoora to 2.0mtpa. The capex for the project is estimated at A$1.2b, however with mining costs and additional infrastructure requirements, we assume a total capital cost of A$2.0b. We have incorporated the expansion into our base case, which lifts our long-term production forecasts by 70%. Spodumene prices have come under pressure in recent weeks, and we have cut our near-term price outlook, which has translated to 13-47% cuts to FY24-FY26 earnings. The reduced near-term earnings outlook has more than offset incorporating the longer-term expansion and we cut our price target 14% to A$4.40. We reiterate our BUY rating on PLS noting that we expect the 2.0mtpa organic expansion to provide a foundation to assess potential acquisitions of development projects.
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