Ground Breakers: America, Buck Yeah! USA grants $800m to Team Aussie battery makers PLL, SYR & NVX
Energy security and decarbonisation may be the dominant investment themes of this particularly fragile point in time, but a third one is fast emerging in the race to satisfy both those needs.
Resource nationalism, long eroded by the growing interconnectedness of global supply chains, is making a dramatic comeback, with North American and European Governments concerned about their reliance on Chinese manufacturing and Russian commodities pouring big bucks to build the supply chains they abandoned decades ago.
Australian companies are tapping that dynamic, flooding into the USA and Canada to help build the supply chains for electric vehicles and renewable energy technology on the ground.
Today, the Biden Administration has announced up to $816 million (US$511m) in grants to three ASX-listed companies working to deliver downstream lithium and graphite materials for US-made EV batteries.
They were among 20 companies with projects in 12 US states who received commitments for US$2.8 billion as part of the Department of Energy’s Bipartisan Infrastructure Law Funding
Syrah Resources (ASX:SYR), currently constructing a 11.25ktpa active anode materials plant at Vidalia in Louisiana, has been selected for a grant of up to US$220m, almost half of the expected cost of a phase 3 ramp up to 45,000tpa currently being placed under a DFS microscope.
Novonix (ASX:NVX) is currently building its first 10,000tpa plant for battery grade synthetic graphite, deploying a process it says delivers a 60% reduction in carbon intensity relative to traditional Chinese synthetic graphite, and will receive a grant of US$150m for a new plant in Chattanooga to produce 30,000tpa for EV makers.
Piedmont Lithium (ASX:PLL) will get US$141.7m towards its Tennessee Lithium hydroxide processing plant in McMinn County, where a US$600m construction program is expected to start next year with first production in 2025, producing 30,000tpa of battery grade lithium hydroxide at full scale.
That would double the processing capacity in the States, with Piedmont potentially producing up to 60,000tpa once all of its lithium assets are operational.
The market went haywire on the news, sending PLL, NVX and SYR shares soaring 9%, 16% and 14% on the news at 11.30am AEDT.
The grants, intended to back around US$9 billion of manufacturing projects to support a US domestic EV supply chain, come off the back of the passage of the Inflation Reduction Act and a groundswell of investment to ween the country of its reliance on Chinese manufacturing lines.
Piedmont COO Patrick Brindle described the shift in attitude as “transformative”.
“Over the last couple years we’ve seen a meaningful shift in policy from announcements from both the prior administration and the current administration around critical minerals, battery materials supply chain,” he told Stockhead.
“We’ve seen that transform into real policy, whether it’s the passage of the bipartisan infrastructure bill, which provided the funding under the first round of grant awards announced today, whether it’s the incentive programs that exist under the Inflation Reduction Act.
“(That) includes both domestic manufacturing as well as resource security from nations with whom the United States has free trade agreements. and our our strategic partners around the world.
“We’re really seeing this huge momentum towards building out a domestic, and by extension a North American and our allied partners, battery materials ecosphere.”
Aside from the signal the funding sets for the US to move beyond EV production to ensure material supply through the supply chain, the grant will enable Piedmont to order long lead items for the Tennessee plant and advance detailed engineering on its Metso-Outotec process in advance of a final investment decision.
“It will help us maintain our overall timeline to bring Tennessee lithium to market in 2025 and it will help us lock in delivery schedule on on some of those key components,” Brindle said.
The award of the DoE grant overshadowed bad news from Syrah today that what it terms “illegal industrial action” is still ongoing at its Balama graphite mine in Mozambique as it attempts to return to full production.
The action, which first kicked off late last month and prompted the suspension of the world’s largest natural graphite processing and mining operation saw graphite production fall from 44,000t in the June quarter to 38,000t in the September quarter, with a sales mix of 86% fine and 14% coarse graphite.
On the plus side, Syrah sold a record 55,000t for the quarter and generated a first positive net operating profit at Balama after C1 and C2 costs, with mining costs expected to fall once the labour issues are solved and Syrah moves to a production run rate of 15,000t a month.
Weighted average prices rose from US$530/t in the December quarter of 2021 to US$662/t in June and US$688/t in September, with EV sales 68% higher year on year in China and graphite anode production in the Middle Kingdom growing year on year by 130,000t.
But Balama’s long term utility will be supplying Syrah with material at Vidalia, where production of the commercial scale 11.25ktpa anode materials plant will have started by this time next year, with an 18 month ramp up to full production after that.
The DoE grant will provide a large portion of funding for a quadrupling of production to 45,000tpa, with customers including EV and battery majors Tesla and today LG Energy Solutions, which signed a non-binding MoU for 2000tpa from 2025 and 10,000tpa after the phase 3 expansion.
Syrah’s MD Shaun Verner said the grant “highlights the strategic importance of our integrated operations”.
“We are the only operating vertically integrated natural graphite AAM supplier outside of China and we have commercial sales arrangements for Vidalia’s products in place with tier 1 customers,” he said.
“The DoE grant will go a long way to funding our expansion plan at Vidalia to 45ktpa and a Definitive Feasibility Study for this expansion is well underway.”
The announcements came on a mixed day for battery metals after Elon Musk’s Tesla, the western world’s leading EV maker, missed Wall Street profit and revenue forecasts overnight.
“Some analysts believe that softening demand is the primary concern, with sales in China — Tesla’s biggest market — having slowed due to rising competition and a poor macroeconomic landscape,” Stake’s markets analyst Eliot Hastie said.
Most of the big lithium stocks were down slightly, as the materials sector fell over 1.8% in a general resources sell-off.
But the tailwinds for EVs and EV raw materials are still there.
Since the Biden Administration entered office, it says, plug-in EV sales have tripled, with the White House aiming to have half of all new car sales be electric by 2030.
That would require a dramatic increase in raw and processed material supply for the auto industry alone, especially if trade relations continue to strain as Xi Jinping’s increasingly autocratic rule grows more nationalistic in China, the world’s primary supplier of EV supplies.
The White House grants today are some acknowledge of the gap in private sector to investment to fulfil these lofty targets.
Lithium prices are currently around record highs, with analysts saying the prospect of supply catching up to demand by the middle of the decade are on a knife edge.
PLL currently owns 25% of the North American Lithium project Sayona Mining (ASX:SYA) is bringing into production next year, is buying into a stake in Atlantic Lithium’s (ASX:A11) Ewoyaa project in Ghana and has its own spodumene deposit in Gaston County North Carolina in the regulatory approval phase.
It would take until 2026 to have the whole suite of assets in operations under Piedmont’s timelines.
“I think the market is starting to come to grips with the challenges around timelines for building mining projects from taking an opportunity from sort of first discovery and first drill hole to (an) asset that’s ready for an investment and ultimately into production,” Brindle said.
“I think folks that follow the market closely know whether it’s lithium or nickel or cobalt or any other elements of the raw materials that we need for this electrification revolution that gap continues to be there.
“From our perspective, we believe that means from a price point of view in terms of our offering to the market that supports the ‘stronger for longer’ thesis.”