Piedmont Lithium and Sayona Mining deal highlights importance of local projects to US EV makers
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Piedmont Lithium’s (ASX:PLL) acquisition of a strategic stake in Canada-focused lithium explorer Sayona Mining (ASX:SYA) highlights the importance to US-based EV makers of having a relatively short supply chain and access to local supply sources.
Outgoing US President Donald Trump signed an Executive Order in October that sought to reduce US dependence on imported supplies of 35 critical minerals like antimony, cobalt, graphite, lithium and tantalum.
Piedmont Lithium secured in September a major supply contract with Tesla for lithium hydroxide production from its North Carolina facility which is targeting production of 22,700 tonnes per year.
Tesla, as an American company, puts a strong importance on having a US-based supply chain for various reasons that include security of supply, cost advantages, and closer inventory management, Piedmont Lithium chief executive and president, Keith Phillips told Stockhead at the time.
“I think they [Tesla] like to have their suppliers close to home. That’s true for all the auto companies we talked to as well,” said Phillips, speaking in September when the company gained a supply deal with Tesla.
“We find from talking to the Germans, who are going to build cars in the US, that the idea of having a US supply of raw materials would be a good thing also.
Piedmont Lithium is to accelerate the development of Sayona Mining’s lithium projects by taking a 19.9 per cent stake in the ASX company, and a 25 per cent stake in Sayona’s Quebec subsidiary.
“Quebec is destined to become one of the world’s major lithium hydroxide production centres given its abundant mineral resources, low cost, sustainable hydroelectric power, proximity to major US and European EV markets, and pro-electricification stance of provincial leaders,” Phillips said.
The US lithium company will take an initial 9.9 per cent equity stake in Sayona Mining, followed by a further 10 per cent stake on conversion of two unsecured convertible notes for $US7m.
Piedmont Lithium will gain the right to appoint one Sayona Mining board member when its stake in the company reaches 9.9 per cent.
“Piedmont is building a world-class spodumene-to-hydroxide business in North Carolina, and we are now very pleased to be partnering with Sayona to advance a similar business in Quebec,” said Phillips.
The US lithium company will invest $US5m cash for a 25 per cent stake in Sayona Quebec, a subsidiary company for its flagship Authier lithium project.
Sayona has agreed to supply 60,000 tonnes per year of spodumene concentrate from its Quebec project as a feedstock to Piedmont Lithium’s processing plant in North Carolina, starting delivery between July 2023 and July 2024.
The feedstock volume is for Sayona Quebec’s life-of-mine operations and is based on market pricing with a minimum price of $US500 per tonne and a maximum price of $US900 per tonne on a delivered basis to Piedmont Lithium’s proposed lithium hydroxide plant in North Carolina.
“Sayona’s assets are favourably located in the Val-d’Or region of central Quebec, home to major mining operations and proximate to first-class infrastructure,” said Phillips.
Sayona Mining managing director Brett Lynch said the partnership with Piedmont Lithium will advance the development plans of both companies.
“Piedmont has shown tremendous vision in creating a base in North Carolina, a centre of lithium hydroxide production in the United States, and has secured significant supply agreements with leading EV makers,” he said.
Piedmont Lithium’s share price dipped 3 per cent to 46c per share after the deal was announced Monday, while Sayona Mining’s share price went up 57 per cent to 2.2c per share.
There are a number of other ASX battery metals companies with projects in North America, including American Rare Earths and Ioneer.
American Rare Earths (ASX:ARR) is accelerating the growth and development of its La Paz project in Arizona, and its Laramie project in the US state of Wyoming.
“Rare earth elements remain a key US strategic resource, which through its domestic development is designed to provide input for US-based processing,” the company said in its 2020 annual report.
Ioneer (ASX:INR) recently committed to its goal of getting its Rhyolite Ridge lithium-boron project in Nevada permitted and ready for construction as early as the second quarter of 2021.