In the June quarter of 2025, Pilbara Minerals ($PLS) reported an estimated average realised price of US$599 a tonne for its spodumene concentrate and a US$462 unit operating cost on the same delivered-to-China basis. The operation still earned a positive spread. The company’s cash nevertheless fell by A$88 million during the quarter. Investors who stopped at the first two numbers would have missed the third. June 2025 quarterly report

The difference matters when buying miners through a slump. A producer can cover its operating costs and still consume cash after building projects, paying interest and funding its partners. A valuable deposit can survive under a new owner. A listed company can survive by issuing enough shares to leave its earlier investors with much less of the eventual recovery.

We would start a counter-cyclical mining position by asking how long the company can keep operating without relying on a better commodity price. Management will usually have a presentation showing the upside. Ask to see the bills that arrive before it does. Buying a cyclical business when others have lost interest still leaves you exposed to its cycle.

Lithium has already supplied an example

PLS entered that difficult June 2025 quarter with choices available. Management consolidated production at Pilgan while leaving Ngungaju idle, reduced costs and planned lower capital expenditure. It finished the quarter with about A$1 billion in cash. That reserve allowed management to keep making decisions while prices were weak. Shareholders still bore the cost of the downturn. June 2025 quarterly report

The subsequent improvement was substantial. For the year ended June 2026, PLS reported A$1.137 billion in underlying EBITDA and A$526 million in net profit, against an A$196 million loss in the previous year. Reported capital expenditure, measured on an accrual basis, fell from A$569 million to A$328 million. FY2026 results

Its A$2.29 billion closing cash balance includes financing support. During FY2026, PLS issued a US$600 million bond and received a US$100 million customer prepayment. Shareholders should distinguish cash generated by selling lithium from cash borrowed or received against future deliveries. June 2026 quarterly report

Lithium supplies an example of surviving a trough and participating in a recovery. Investors considering it today face a later stage of that story. Australia’s September outlook forecasts average spodumene prices of about US$2,411 a tonne in 2026, compared with US$804 in 2025. Those are annual figures, with 2026 still a forecast, rather than an October spot quotation. The same outlook expects additional supply to restrain prices over subsequent years. Resources and Energy Quarterly, Table 14.1

Zinc shows what survival can cost

Glencore ($GLEN) faced a similar decision in 2015. In October it announced annual zinc production cuts of 500,000 tonnes, roughly one-third of its output, to preserve resources during weak prices. The company could leave some metal underground and wait. Production announcement

Shareholders helped finance the wait. Glencore raised approximately US$2.5 billion by issuing new shares equivalent to nearly 10 per cent of its pre-placing issued ordinary shares, excluding treasury shares. It also suspended distributions expected to conserve US$2.4 billion. Non-participating shareholders were diluted, while the suspended distributions reduced owners’ near-term income. Equity placing · Debt-reduction plan

Zinc subsequently recovered. The World Bank’s monthly averages rose from US$1,520 a tonne in January 2016 to US$2,981 in August 2017. These observations are neither daily extremes nor a measure of shareholders’ returns. January 2016 data · August 2017 data

Adjusted EBITDA from Glencore’s zinc assets rose from US$1.073 billion in 2015 to US$1.916 billion in 2016. That measure includes by-products and custom smelting. Management eventually restarted Lady Loretta in the first half of 2018. Glencore was a diversified miner and trader, with several ways to fund itself. A smaller producer attempting the same wait could face a very different outcome. 2016 annual report · 2018 production report

We have selected these successful examples with hindsight; they do not establish how often this approach would have worked. Anyone testing the lesson should reconstruct the choices available before the recovery, including companies that failed or required expensive rescues. The useful test is whether an investor could have identified the funding and operating advantages at the time.

Nickel requires a harder question

Investors cannot assume that every unwanted commodity follows the same recovery timetable. A temporary inventory surplus can clear. New producers with persistently lower costs can change the price at which older mines remain competitive.

Indonesia’s nickel expansion makes that distinction important. The International Nickel Study Group estimated that Indonesia supplied 65 per cent of mined nickel in 2025. Its April 2026 forecast anticipated a small deficit that year as tighter ore supply was expected to constrain output. Australia’s later September outlook projects renewed surpluses from 2027. Neither gives investors a reliable date for a lasting price recovery. INSG market overview · September outlook, Table 12.1

The distinction between financing a company and rewarding its existing owners remains current. On 12 October, Eramet reaffirmed a planned €500 million rights issue, describing it as necessary to restore its financial position and maintain compliance with bank covenants. Shareholders may have to contribute more capital to preserve their proportional ownership. Eramet announcement

What sort of survivor are you buying?

Some producers can wait comfortably. Others can wait if shareholders send more money. The following examples show how to tell them apart, without pretending that every survivor is a bargain. Establishing an attractive purchase price requires a separate valuation using current equity prices and fully diluted ownership.

The operator with choices

PLS has demonstrated that it can retain operating capacity through weak prices and generate substantially better earnings when prices improve. Its next decisions concern the use of that capacity and the cash it has raised.

Management began restarting Ngungaju on 1 July and guided to A$620–685 million of FY2027 capital expenditure. Higher production could increase cash generation, but also raises spending and supply. We would test whether PLS can fund that programme under lower realised prices. Repeated cost overruns or expansion requiring fresh shareholder funding would weaken the resilience case. June report · FY2026 presentation

The producer that responds to the price

Albemarle ($ALB) reported US$1.6 billion of cash and US$3.2 billion of liquidity at June 2026. Its published FY2026 scenarios estimate corporate adjusted EBITDA of US$0.9–1.0 billion at an average lithium market-price assumption of US$10/kg lithium carbonate equivalent, versus US$2.4–2.6 billion at US$20/kg, under specified volume, contract and cost assumptions. These scenarios illustrate sensitivity; they are not price forecasts. Second-quarter results

A recovery can improve earnings considerably. Shareholders must still allow for capital spending, interest and tax, and include the dilution from mandatory convertible preferred shares expected to convert in March 2027. We would question the case if weaker prices leave insufficient cash after operating and financing obligations. June 2026 filing

The good deposit with partners

SQM ($SQM) reported approximately US$3.38 billion in cash and US$924 million in net financial debt, under its reporting definition, at June 2026. Those figures support further examination of its ability to withstand weaker lithium prices. Half-year financial statements

Investors also need to understand the Atacama partnership. Codelco owns 50 per cent plus one share of Novandino; SQM owns the remainder. SQM manages through 2030, with Codelco taking over from 2031. The later period brings different economic arrangements and requires new environmental approval for the operations. Higher lithium prices could help, but a valuation assuming unchanged ownership and cash participation would be unreliable. SQM annual filing

The large company with a small exposure

Vale ($VALE) reported US$5.765 billion in cash and short-term investments, US$13.173 billion in net debt and an average debt maturity of 8.1 years at June 2026. Its size and financing options deserve consideration, although nickel-metal sales represented only about 8 per cent of second-quarter group revenue.

Improved nickel earnings would help, but shareholders also depend on the rest of Vale. Its US$10,340-a-tonne nickel “all-in cost” is an EBITDA break-even measure benefiting from by-product credits; it does not establish free cash flow after sustaining capital. Vale puts that break-even at US$11,478 a tonne when only the cash effects of streaming transactions are included. We would test those credits and capital requirements before treating nickel margins as durable. Second-quarter report

The producer with bills coming due

Nickel Industries reported US$260 million in cash against US$1.25 billion of gross principal debt at June 2026. First-half operating cash flow was US$78.8 million, before US$51.1 million of interest classified under financing. After that interest, roughly US$27.6 million remained before investment spending, debt-principal payments and other funding requirements.

The company also faces investment payments of US$169 million in November 2026, with a financing backstop, and US$144 million in April 2027. Stronger nickel margins could improve its position. Investors considering it must first establish how those obligations will be funded and what that funding costs existing owners. We would treat it as a higher-risk case. Half-year report

Build the position around what can go wrong

We would begin with a weak-price cash-flow estimate and the next financing deadline. Include sustaining expenditure, interest, royalties, working capital and unavoidable project commitments. Count only cash and facilities the company can actually use. A partner’s bank balance does not necessarily fund the parent.

Then value the business at restrained recovery prices, allowing for any shares or financing needed to get there. Compare that result with the equity price today. Historical highs and replacement costs cannot do that work alone.

Investors can spread exposure across operating businesses, keep some capital uncommitted and add when financing or operating evidence improves. Owning several companies dependent on the same price rebound offers less diversification than the number of holdings suggests.

Before buying, write down what would change the decision: persistent cost overruns, falling accessible cash, a difficult refinancing, or competitors returning enough production to undermine the assumed recovery. A lower share price should prompt another examination of those facts.

We would pay for a producer’s demonstrated ability to endure weak prices. We would be much slower to pay for management’s confidence that those prices cannot last.

Opinion and commentary. Financial figures relate to the reporting dates stated. The company discussions are research cases, not current buy recommendations.