Australia's PLS Group approved an A$1.9-billion ($1.31-billion) expansion of its Pilgangoora lithium mine on Friday, betting that growing electric-vehicle adoption will support long-term demand for the key battery-making ingredient despite recent volatility in prices.

The country's largest independent lithium producer said the P2000 project will boost spodumene concentrate production at its flagship project in Western Australia to nearly 2-million tonnes per annum (mtpa) from 2029, through the construction of a new Jimmagunya processing plant.

Its shares rose more than 6% in early trading, set for their best day since August 24.

Energy transition and growth in battery storage continue to support the long-term demand for lithium, with companies worldwide racing to secure the metal.

PLS, formerly known as Pilbara, said the project was made possible by advances in processing technology that allowed around 67-million tonnes of material previously classified as waste to be brought into the mine plan, helping increase Pilgangoora's ore reserve by 23% and contained lithium by 31%.

The project, it said, would lift average annual production to about 1.97-million tonnes of spodumene concentrate over the first 10 years of steady-state operations, while lowering average unit operating costs to around A$620 per tonne.

CEO Dale Henderson said the project would strengthen Pilgangoora's position on the global lithium cost curve and provide greater exposure to any recovery in lithium prices.

The company also plans to invest a further A$600-million to A$650-million in supporting infrastructure, including a new accommodation village, road upgrades and maintenance facilities, while funding the development from its A$2.3-billion cash balance and operating cash flows.

PLS revised its FY27 capital expenditure forecast to be between A$1.11-billion and A$1.18-billion to incorporate the P2000 expansion and associated infrastructure spending.

It said the P2000 expansion would also produce tantalum, a critical mineral used in electronics and defence, as by-product.