Pilbara Minerals (PLS) - no subsidy required

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Pilbara Minerals (PLS) - no subsidy required.

11 November 2025
Author: Sandstone Insights

Spodumene (lithium rock) prices declined by the order of 90% from extended levels at the beginning of 2023 through to a trough in the middle of 2025. New mines were coming into production but lithium demand from the uptake of Electric Vehicles (EV) had been slower than forecast. Many mines fell into a loss-making positions and some were eventually mothballed, an important step towards rebalancing the market.

Meanwhile the pace of EV uptake started accelerating, as did the installation of Battery Electric Storage Systems (ie. batteries to support the electricity grid - BESS), another important step toward rebalancing the market, and the spodumene market eventually found a bottom. From a low of ~US$635/tonne in June 2025, it rallied to over US$1,000/t by August before settling around US$820/t.

The stock prices of lithium miners such as Pilbara Minerals (PLS) anticipated the bottom in the lithium price and started moving higher. We have plotted below the relative share price performances Australia’s Liontown (LTR) & Pilbara Minerals (PLS) along with Chile’s Sociedad Química y Minera (SQM) and America’s Albemarle (ALB).

Figure 1: Major lithium miners anticipated the bottom in lithium prices.

Source: Factset, Sandstone Insights.

Adding to the evolving supply outlook, China revised its Mineral Resources Law in July 2025, centralising registration and approvals for strategic minerals, including lithium, under the control of the Ministry of Natural Resources rather than local and regional authorities.

Mines were required by the Ministry of Natural Resources to resubmit reserve reports for verification. This included mines operated by CATL (Contemporary Amperex Technology), the world’s largest battery manufacturer and a significant miner of lithium in China. Its largest mine, Jianxiawo, which accounts for ~5% of global supply, has been required to stop operating while the re-certification process runs its course.

When production was halted at the Chinese mines the PLS stock priced moved sharply higher to $2.48. When news came through that CATL’s reserves statements had been approved, PLS dropped back to $1.99. However, despite CATL’s mines being expected to resume production any day, PLS has now moved 30% higher to $2.60. This is significant and indicates that in the space of a few months the market is seeing an improved demand-supply balance for lithium.

Figure 2: Pilbara Minerals (PLS) is hitting new highs for 2025 despite rising short interest

SSource: Factset, Sandstone Insights. Rebased to 100 one year ago.

PLS is a heavily shorted stock and the level of short interest has risen over the course of 2025. We make two points here. Firstly, the current share price of PLS implies a spodumene price ~50% higher than current, so the bears have a point. However, the short interest needs to be bought back at some point and with PLS moving sharply higher, the 200m shares of net new short interest opened over the past five months are deeply loss-making and forced covering will support further price momentum. Our view is that the lithium price has bottomed, EV and BESS demand is growing rapidly, and the momentum in the price of lithium miners foreshadows an improved outlook for the entire lithium complex, PLS included.

The data on this page has been provided by an external data vendor and has not been verified by Commonwealth Securities Limited (CommSec). All recommendations, data, calculations and values have been provided for your information only and should not be relied on for financial or any other purposes. CommSec does not accept any responsibility for any losses suffered due to reliance on the data, calculations or values. Past performance is not an indicator of future performance.

Sandstone Insights research methodology

Sandstone Insights’ recommendations of Buy, Hold or Sell, are based on detailed qualitative and quantitative analysis of a company’s income and growth risk profile to derive an estimate of the total return an investor can expect over a 12-month period. We define total return as the share price return plus gross dividend yield and use this analysis to derive our recommendations below:

BUY: Expect the total return to be more than 10% in the 12-month period from the date of recommendation
HOLD: Expect the total return to be between +10% and -5% in the 12-month period from the date of recommendation
SELL: Expect the total return to be more than -5% in the 12-month period from the date of recommendation

Sandstone Insights’ quantitative model utilises historical and forecast consensus data points to determine and classify our recommendation for each security, including:

Forecast changes in earnings or sales over the next 12 months.
The company’s dividend or distribution yield forecast, grossed up for any franking credit benefit a shareholder will receive.
The change in the valuation multiple paid for the stock. The choice of multiple will depend on the nature of the business. We may use PE, EV/EBITDA, EV/Sales, dividend yield or price to book depending on the most suitable measure for the industry and life-stage of the company. We review the multiple and compare it to its three-year average and adjust the suitable multiple depending on our judgement about the quality of the business. Quality factors will include reputation of management, consistency of delivery, visibility of earnings drivers and the dispersion of analyst forecasts.

Sandstone Insights’ recommendations are not static and will be updated as consensus data and analyst forecasts are changed. Accordingly, the income and growth risk profiles for each stock may change over time as the data changes.

Key Properties definition

Sandstone Insights’ model will derive a Key Properties profile based on important factors in assessing a company’s future performance. We consider the level and sustainability of a company’s income, the level of risk and the moat position, or the defensive characteristics of the company. Each of these factors is rated on a scale and explained as follows:

Rating

BUY: Expect the total return to be more than 10% in the 12-month period from the date of recommendation
HOLD: Expect the total return to be between +10% and -5% in the 12-month period from the date of recommendation
SELL: Expect the total return to be more than -5% in the 12-month period from the date of recommendation

Income
1. High sustainable income. A dividend yield above the market average and expected to be sustainable over several years.

2. High income. Dividend yield above market average

3. Dividend yield in line with market average

4. Below market average dividend yield

5. No dividend, no prospect of imminent shareholder payments

Growth
1. High growth business with above average earnings growth and momentum.

2. Growth business with positive earnings growth

3. Earnings growth in line with market expectations

4. Below market earnings growth

5. Declining earnings growth

Risk
1. Low risk business with low operational, regulatory and financial risk

2. Low risk business with below average operational, regulatory or financial risk

3. Average degree of business risk

4. Above average operational, regulatory or financial risk

5. Multiple risk exposures that could be detrimental to the business

Sandstone Insights’ recommendations are of a general nature only and individuals must consider their own specific investment goals, risk tolerance, tax situation, time horizon, income needs, and complete investment portfolio, among other factors.