Pilbara Minerals Secures Downside Protection in Strategic Canmax Offtake Deal

About Pilbara Minerals Limited

Pilbara Minerals Limited (ASX: PLS) is one of the world’s largest independent hard-rock lithium producers, operating the globally significant Pilgangoora lithium operation in Western Australia’s Pilbara region. The company produces spodumene concentrate used in lithium-ion batteries for electric vehicles, energy storage systems and consumer electronics, and continues to position itself as a long-term strategic supplier to the global battery materials industry.

In an environment marked by near-term lithium price volatility but enduring structural demand growth, Pilbara Minerals has announced a new offtake agreement designed to balance earnings resilience with long-term upside exposure. The agreement introduces a rare combination of downside price protection, interest-free funding and customer diversification, reflecting a disciplined commercial approach as the lithium sector navigates a cyclical reset.

Strategic Offtake Agreement With Canmax

Pilbara Minerals has entered into a binding two-year offtake agreement with China-based Canmax Technologies, covering the supply of 150,000 tonnes per annum of spodumene concentrate on an SC6 basis. Deliveries are scheduled to commence in calendar year 2026, with an option for Pilbara Minerals to extend the agreement for a further 12 months at the same annual volume.

The agreement introduces a minimum price floor of US$1,000 per tonne, providing meaningful downside protection if market pricing weakens, while allowing Pilbara Minerals to retain full exposure to any future price recovery. There is no ceiling on realised prices, ensuring upside remains uncapped should lithium market conditions improve.

This pricing structure reflects evolving commercial dynamics within the lithium sector, where producers are increasingly seeking mechanisms to stabilise cash flows while maintaining leverage to long-term demand growth.

Funding Structure And Balance Sheet Impact

A key feature of the agreement is Canmax’s commitment to provide Pilbara Minerals with a US$100 million unsecured, interest-free prepayment. The prepayment will be progressively repaid via credits against spodumene deliveries under the offtake arrangement.

The funding carries no interest costs and is free of restrictive covenants, enhancing Pilbara Minerals’ liquidity position while preserving strategic flexibility. Importantly, the structure avoids shareholder dilution and complements the company’s existing capital management framework.

Management noted that the prepayment will strengthen near-term balance-sheet resilience at a point in the cycle where disciplined financial management remains a priority across the lithium sector.

Operational Flexibility And Production Capacity

Pilbara Minerals retains full flexibility in how it fulfils the contracted supply volumes. The company can deliver spodumene from the Pilgan Plant, the Ngungaju Plant, or a combination of both, depending on operational requirements and prevailing market conditions.

Based on current production plans and existing customer commitments, Pilbara Minerals has sufficient uncontracted capacity at its Pilgan processing facility to satisfy the full Canmax offtake volume without constraining other sales channels. This operational optionality supports efficient asset utilisation while preserving the ability to respond dynamically to shifts in demand or pricing.

Strengthening Customer Relationships And Market Access

Canmax Technologies is a major battery materials producer listed on the Shenzhen Stock Exchange, supplying cathode materials to leading global battery manufacturers. Securing a multi-year offtake agreement with Canmax further diversifies Pilbara Minerals’ customer base while strengthening its exposure to established downstream players.

The agreement reinforces Pilbara Minerals’ role as a reliable, large-scale supplier capable of supporting the needs of the global battery supply chain. It also enhances the company’s credibility with international counterparties seeking long-term security of supply from low-risk jurisdictions.

Positioning Within A Volatile Lithium Market

The global lithium market has experienced pronounced price volatility over the past 18 months as rapid supply growth temporarily outpaced demand, particularly within China. However, long-term structural drivers remain intact, underpinned by electric vehicle adoption, grid-scale energy storage investment and decarbonisation policies across major economies.

Against this backdrop, Pilbara Minerals’ offtake structure represents a balanced approach to managing cyclical risk without compromising strategic positioning. The inclusion of a price floor protects cash flows during periods of market weakness, while uncapped upside ensures full participation in any future recovery.

Broader Strategic Context

Pilbara Minerals continues to advance its position across the lithium value chain, including through its downstream lithium hydroxide joint venture with POSCO in South Korea. The Canmax offtake agreement complements these initiatives by reinforcing stable upstream cash generation and supporting long-term capital allocation discipline.

As one of the largest independent hard-rock lithium producers globally, the company remains well placed to benefit from tightening supply dynamics as demand growth resumes over the medium term.

Outlook

The Canmax offtake agreement enhances Pilbara Minerals’ financial resilience while preserving strategic flexibility in an evolving lithium market. With downside protection secured, liquidity strengthened and customer diversification expanded, the company is better positioned to navigate near-term volatility and remain leveraged to long-term electrification trends.

As global battery demand continues to scale and supply rationalisation progresses, Pilbara Minerals’ combination of scale, operational optionality and disciplined commercial structures is expected to support sustainable value creation over the cycle.