Piedmont Lithium (NASDAQ: PLL; ASX: PLL) and automaker Tesla agreed to cut their supply agreement by tonnage and time while shifting the source away from a proposed mine stymied by the approvals process.
Piedmont is to send 125,000 tonnes of spodumene concentrate (SC6) to Tesla over three years (about 41,600 tonnes a year) starting in the second half of this year, according to the agreement announced Tuesday in a news release. There’s an option to extend it for another three years.
It replaces the September 2020 agreement that would have seen Piedmont supply about 53,300 tonnes a year of SC6 to the automaker for five years if deliveries started in the 12 months following last July.
The new agreement changes the source to a Quebec project called North America Lithium, which Piedmont bought into in 2021, instead of a US$840 million open-pit project in North Carolina that has yet to secure permits.
“The electric vehicle and critical battery materials landscape has changed significantly since 2020 and this agreement reflects the importance of – and growing demand for – a North American lithium supply chain,” Piedmont Lithium president and chief executive officer Keith Phillips said in the release.
Automakers and other technology companies are scrambling to gather supplies of lithium to make batteries for their electric vehicles and modern gadgets like mobile phones. Tesla chief Elon Musk has mused more than once on the possibility of buying the company’s own lithium mining operations. The light metal is also important for his rocket company, SpaceX.
But U.S. production of lithium hydroxide used in batteries is sparse at about 15,000 tonnes a year, Piedmont says. Lithium reserves across North America’s three countries total just 2.6 million tonnes compared with 9.2 million tonnes in China alone, according to a May 2022 report from McKinsey & Co.
Production start
Piedmont says it expects spodumene concentrate production to restart at its quarter-owned North American Lithium project in Quebec by June, with first commercial shipments slated to follow in the summer.
The North Carolina-based company said it plans to deliver SC6 to Tesla from the Quebec project under Piedmont’s agreement with Sayona Mining (ASX: SYA), which owns three-quarters of it. The deal allows Piedmont to buy 113,000 tonnes per year or half of the project’s SC6 production, whichever is greater.
The SC6 shipments to Tesla will be priced according to average market prices for lithium hydroxide monohydrate at the time of each delivery, Piedmont said.
The new agreement with Tesla helps keep the Quebec project’s output in North America, the miner said. It also supports efforts by the Biden administration to boost the supply of critical minerals like lithium, copper, nickel and cobalt needed for the clean energy economy, such as through the funding earmarked last year in the U.S. Inflation Reduction Act.
Piedmont was among 20 companies awarded US$2.8 billion in U.S. government funding last year to help the critical minerals industry meet electric vehicle and other green energy targets. Washington is trying to loosen Beijing’s hold on the global supply of critical minerals. Experts say it controls some 80% of the market.
Piedmont Lithium said it plans to use the US$141.7 million from the program to build a US$600-million processing plant in Tennessee for material mined in Quebec and in Ghana. It is partnered in the African country with Atlantic Lithium (AIM: ALL; ASX: A11).
Shares in Piedmont Lithium initially rose on Tuesday in New York but faded by midday, down US$1.45 or 3.3% to US$42.57, within a 52-week range of US$32.08 and US$79.99, valuing the company at US$767 million.
Shares in Sayona Mining closed flat at A19¢ (17¢) on Tuesday in Australia, within a 52-week range of 11¢ and 39¢, valuing the company at A$1.65 billion.
Tesla can’t use spodumene in cars, it has to be processed into lithium hydroxide or lithium carbonate. There are no plants in North America capable of doing this. The maerial will have to leave North America.