Stocks In Focus: Pilbara Minerals, December 10 2025

0:10G'day fools and welcome to Motley Fool Stocks in Focus, the Motley Fool series that goes across both our podcast feed and our YouTube channel. If you don't know me by now, I'm Scott Phillips, the Motley Fool's Chief Investment Officer here in Australia. Thanks for listening. Thanks for watching. I'll get back to that in a minute. Before I do, let me introduce Motley Fool advisor and analyst, Ed Vesely. Ed, g'day. G'day, Scott. How are you going? Mate, I'm very well. We're going to talk about Pilbara Minerals, although we're not going to talk about Pilbara Minerals, are we? Because there's been a name change, but most people will know it as Pilbara Minerals.

0:42The code is PLS. Now, before I get into that, Ed, I am going to do two things. One is I'm going to ask people to check out the other channel. If you're listening to this on the podcast, thank you. Thanks for being part of our podcast community. Please check out and check out the YouTube channel. Why? Because if you like this stuff on audio, there's even more of it in video. Yes, you've got to look at me. That's a small price. Well, maybe it's a large price to pay. Either way, there's lots more good stuff on the YouTube channel. Simply youtube.com forward slash foolau. If you're watching this on YouTube, thanks.

1:13And again, apologies for having a look at me. Might be for Money podcast feed. It's got some great other content. And I figure if you're doing this, if you're listening to this or watching this right now, you probably hopefully like what we do. Maybe you just found it on a chance. Either way, I reckon if you're interested in investing, more is better and it's all free on YouTube. It's all free on the podcast feed. So check those things out. Second thing I'm going to say is we always do this, but it's important. This is general, not personal advice. And it's only at a point in time. We're recording this one early March.

1:42March, yeah, Michael, early December. Where do you get March from? early December 2025, things change, right? Ed's view, my view, the company's circumstances will, might, will change over time. And so this is a view at a point in time. Lastly, it's not a formal recommendation. I will ask Ed at the end to stick his neck above the, or head above the parapet, neck on the line and say, what do you reckon? Do you reckon it's a market beta? So stick around for that. But just remember, it is not a formal Motley Fool recommendation. All right, with that, Ed, Will you tell me, please, what Pilbara Minerals is and what it does?

2:13Yes. And before I start, and as you've alluded to already, I'll call it Pilbara Minerals, but it has recently changed its name to PLS Group. Seriously. And, Scott, I know you're very good at reminding us never to call a stock by its code. Yeah, correct. Its name. But we'll call it PLS Group or Pilbara. I'll probably use that interchangeably. So what does it do? Well, first of all, it's a company that owns hard rock lithium operations. It's actually one of the world's largest deposits in the Pilgengura region of Western Australia. And so the main product that I suppose it digs up and sells is called spodumene concentrate.

2:58And what that is, it's like a high-purity lithium ore, and that's the product that it gets to market. but it also produces tantalum as well. So that's another, I guess, by-product of its processing. I just wanted to emphasise too the hard rock aspect to this. Now, I'm not a geologist by any stretch of the imagination but I have been reading up on it and studying it quite closely and a lot of its competitors in Chile and Argentina, for example, are actually, I guess, mining lithium, brine lithium, which is a totally different type of chemistry. And what hard rock lithium does, it really does provide the company with a competitive advantage in that it can process its ore faster, it's got higher recovery rates, and it's got greater control over, I guess, the quality of its product and its byproducts.

3:52So that's a really big competitive advantage, I think, for Australian lithium, at least, against other areas of the world. So that's what it does. Last year, financial year, it brought in$769 million in revenue. The other interesting little tidbit of information was that this company, you know, you talk about BHP, which was created back in the late 1800s. This company was only founded in 2013, which I thought I didn't know that. So that's something I've learned. A group of five geologists came together. They were studying at university and they got together to create this company. first drilled successfully in 2014 and it first ended production in 2018.

4:32So, that's only seven years ago. So, here we are today with a company that's bringing in$769 million in revenue. So, it's a pretty simple company. I just wanted to also add too that it's quite, what would you say, it's very concentrated. So, around 85 % of its assets are in Australia. It has recently made a purchase in or an acquisition in Brazil. So, it's trying to, I guess, diversify a little bit. But here's the kicker. I've spoken to you about Fortescue in the past. Revenue from its external customers, 84 % of that goes to China. So that's both a good thing and a bad thing. It depends on the amount of customer concentration that you'd be willing to take on as risk.

5:12So, yeah, other countries, around 16%. I think diversification is definitely key for this business. The company is certainly, as I say, trying to diversify one step at a time. but it's still very much relied on its operations in Western Australia and selling to China. So that in a nutshell is what PLS does or Pilbara Minerals does. Thank you, mate. Now, we talk about companies, we talk about investments and you can't entirely divorce one from the other, but the best company in the world can be a terrible investment at the wrong price. Even the best performing company can have a questionable future.

5:45So when we look at a business, we say, well, what does it do? That's the first thing you've done that for us beautifully. Then we look at trying to look at the pros and the cons of an investment. Now, just by the way, if this is your first time listening to or seeing Stocks in Focus, the idea of the series is to kind of pull back the curtain a little bit, to share with you some of the analysis our team does and do. Why? Well, it gives you a bit of a look at what we do and how we do it. We kind of hope that's useful for you. But also, too, some of these companies you hear about, you read about, you think, maybe I know what it does, maybe I don't, maybe I understand it, maybe I don't.

6:13But we're trying to give you a framework to think about not only this particular company, although we will focus on Pilbara today, but just companies in general, how our investment process works. And again, that's why I hope if you're on the podcast feed, if you're on the channel, the podcast feed, every Wednesday we release Stocks in Focus, almost every Wednesday. On the YouTube channel, there's a whole playlist called Stocks in Focus. And I hope you'll have a chance to have a bit of a listener or a watch or both on some of the other stuff that we're doing. It's already mentioned the Fortescue conversation we had not long ago.

6:40As you start to build your investing ability, even if you just want to broaden out the exposure to different types of companies, industries, we hope that's useful. That's exactly why we do this particular series. Now, when we make a recommendation at the Motley Fool, we say, this is why we love it, here's a couple of risks. We don't try and be balanced. We're not trying to do that. When it comes to stocks in focus, I'm not going to ask the guys to be balanced either, but we are going to say, look, give us all the pros, give us all the cons or list, the major ones. And then, again, I will ask you to make a view, but this is very much about saying, here's some of the good things you might like, here's some of the things you might want to be mindful of.

7:11And we're not trying to make a case one way or the other. If we did, it'd be a formal recommendation already. This is just a look under the bonnet. And again, a bit of an opportunity for you to see how our analysts think about some of these businesses. So with that preamble later, I will get you to go through both the pros and the potential cons of an investment in PLS or Pilbara Minerals. Absolutely. Yeah, and it's a company too that's not recommended anywhere at the moment at the Motley Fool. But I guess the key reason why you'd be an investor in a company like this is because of the long-term thematic, and that is electrification, decarbonisation.

7:48And these are all themes that I suppose provide opportunity for lithium producers like this company to benefit from the transition to electric vehicles and certainly the build-out of stationary energy storage. Now, I guess there's commentary about whether or not that will be as obvious as it might be or may not be. So it depends on how the future rolls out. But the company itself says lithium continues to be a critical enabler of the energy future. And that's correct if that future rolls out the way that they think it might and governments might as well. So I guess there's a bit of uncertainty there.

8:28But that certainly is a very strong thematic. And it's a good reason to at least maybe consider having shares in a company like this, because it will certainly benefit given its concentration in this one commodity. I mean, there are others as smaller offtakes as well within its operations, but it's mainly a lithium producer. So if you're comfortable with risk, it's a good play in that regard. I mentioned its Pilgrim Gura lithium operation. As I said, it's one of the largest hard rock lithium deposits in the world. So that's actually a very big competitive advantage for it against its competitors.

9:03The other thing I liked about it too is that it does have also very strong relationships with customers. So for example, there's a consortium of high quality, well, I think high quality global partners and off-take customers. So you've got customers that are linked to supply chains for Tesla in the United States and globally and BYD in China. LG is another one. And so there's all these other companies which have this massive demand for lithium. And so obviously you would think that the company is in a pretty good strategic position to supply that, and it is. And another reason why you might want to consider buying shares is this is a company that's actually not heavily geared.

9:44It does have debt on its balance sheet. Check this. This is for FY25. It has debt of$682 million, but it's got a cash position of$974 million. So its net cash position is$292 million, which places it in a very, very sound position financially. So financially, it's fine. The company is not geared to the hilt or anything like that. It's perfectly leveraged to lithium. I guess there's risks and we'll discuss the risks in a moment. But the other, I suppose the final thing is that it's not just trying to dig lithium out of the ground and sell it. It's trying to become more of a processor of that as well.

10:20So I guess that's more of a, you would say, a work in progress. But the company is aiming to be, I guess, a key player in clean energy. I mean, they would all say that anyway, but that's where it's trying to move towards. And midstream processing and pushing for more advanced products which could be used in battery chemicals, for example, down the track. So it's, I don't know if that's likely or not, but it's certainly going in that direction and it's certainly well positioned to do so. So there are a lot of good reasons why you might want to at least consider Pilbara Minerals as a small part of a portfolio.

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11:09Now, as you alluded to, we're going to do the cons. This can be reasons not to buy or at least risks to consider before you buy or when you buy. So you're going in with your eyes wide open if that's what you decide to do. Again, this is not personal financial advice. We can't tell you what you should do. It can only give you his view about the company. So let's go through that. Let's look at the list of cons. What would keep you away or at least make you think twice about investing in Pilbara Minerals or PLS Group? Okay, well, certainly what would keep me awake at night on this company is certainly the fact that it's pretty much a single commodity.

11:42company. It's concentrated on lithium and it's also concentrated on China. And so, as I said, there's 84 % of its sales go to China. So, if anything was to happen to that relationship or if the Chinese economy was to turn down or if there was to be geopolitical goings on in Southeast Asia, which, you know, if you read the media is something that could happen, And there could be risks to, I guess, the well-being of the company's sales pipeline. So, that's one thing. But it all comes back to, I think, the main risk is really the lithium price itself. Now, when that's booming, you're going to see, I think, a very, very happy shareholder at Pilbara Mineral.

12:24But last year, and I'm talking about the financial year FY25, that's the 12 months to the end of June, lithium actually had fallen quite sharply. And I looked at its income statement and its costs were roughly, roughly the same. But because the revenue had come down so far, there was actually a very adverse effect on its margins. And that actually led to a loss of just under$196 million for last year. Now, when I look at its long-term history, I've got a graph in front of me, which I can't share. but it shows that this company has actually been making losses all the way through from since it started through to about 2021 when it made its first profit.

13:04And there was this massive peak. And I think that's also lithium prices as well. But lithium prices have come right back down again. And so 2022, 2023, there was a pretty good time. And then you've seen, I guess, profitability just fall off a cliff. And as I said today, there's a loss there currently, it could improve, but it all depends on the lithium price. So it's a company that is perfectly leveraged to increasing demand and hopefully competition that doesn't rear its head too much for the company. But these are the main risks. I guess the other things to just consider on the side as well is that if it's looking to expand as it has in Brazil, or if it's going to expand existing operations, there's certainly expansion and operational risk, especially with a fluctuating lithium price, okay, because that's going to affect margins.

13:53And I think it would actually be quite hard to plan because nobody knows where the price is going. And when there's increased capital intensity at a time of falling lithium prices, you're going to get crunched. So I think if you're fully aware of all of that, there's still maybe a case for buying shares in Pilbara Minerals, but it's not something I would personally buy into. But they're some of the key risks. So there's certainly some very good reasons to buy the shares, but you've also got to be aware of some of the things that could go wrong as well. Tell you about it too, mate. You talked about those price impacts, about the profitability impacts.

14:25I just pulled up the share price chart where you were chatting. And again, we don't invest at all based on share price charts, but if you think about the impact of that profit volatility on the share price, this was a$17 share price back in 2020. By So middle or late 2022 was up to$5.09 and then back to$1.24 in the middle of this year. And then as we record this, up to$4.07. So it's going to be a heck of a ride no matter what the long-term story looks like. I am going to hold your feet to the fire. I am going to say, or ask you at least, to look over a five-plus year time horizon. Why, by the way?

15:01Because that's what The Motley Fool does. We're long-term investors. Don't let anyone tell you long-term is six months or a year or three years. Long-term is five years and more. hopefully very long term is even more than that. What do you reckon, mate? What are the odds that Pilbara Minerals or PLS is a market beater over the next five years? Or do you expect it might actually lag the ASX from here? Well, I don't have a crystal ball, but I will say this. There were some very good profits of this company between 2022 and 2024. But it's delivered losses in five of the last eight years. So you consider that.

15:34I think growth is going to be quite variable in the future. So I think that we'll maybe see that pattern continue in the years ahead. So I would say definitely, if you're going to invest in this, you want to be there for at least five years just to sort of get through these poorer periods. I'm just going to put a caveat on it. I would say it's actually, I would maybe consider buying shares in Pilbara Minerals, but only for those shareholders who have to know themselves, what they're getting into, and it would have to be a very small part of a portfolio. I wouldn't have, say, more than 5 % for example, of this company in a diversified portfolio.

16:11If you're buying 1 % or 2 % in a portfolio, I think it could easily double. But it could easily halve as well. So, I don't know. It's not something for me. I'm not typically an investor in resources or resources like companies like this one. But I can see some errors. And as I say, it does have a very good balance sheet, which I think would help it through its poorer periods of profitability. So, my caveat, I'll say the caveat is if you know yourself and you're willing to put in a small amount as a smaller part of a diversified portfolio, hopefully it's diversified already, then I think it's a buy.

16:45There you go. It's a market beater from Ed Vesely. I did not expect that. So there you gave surprise me. It's the great thing about these videos, by the way, there's no script. I don't ask the team in advance what they're going to say. I am learning as you are. Ed's a smart guy. He's done the work. You heard what he said, super volatile. Maybe it works, maybe it doesn't, but on balance, he reckons it might be a market beater. Ed, thank you for sharing your expertise with us on the podcast and on our YouTube channel. First, do the usual things for me, if you wouldn't mind. If you're on one of the podcast platforms that allows you to hit the like button, please do that for us.

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