Piedmont wins coveted Tesla lithium spodumene sales deal
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Electric vehicle trailblazer Tesla has been clear about its preference for securing US sources of raw material and now Australia’s Piedmont Lithium (ASX:PLL) has been picked to be one of those suppliers.
Under the coveted agreement, Piedmont will deliver about a third of its planned spodumene concentrate (SC6) production of 160,000 tonnes per annum from its North Carolina deposit to Tesla for an initial five-year term.
Tesla may increase the size of the order at its option and the agreement may be extended by mutual agreement for a second five-year term.
Piedmont notes that SC6 sales are expected to generate between 10 to 20 per cent of its total revenues from the proposed mine to hydroxide project for the initial five-year term.
The agreement is conditional on the two companies agreeing to a start date for SC6 deliveries between July 2022 and July 2023 depending on their respective development schedules.
“We are excited to be working with Tesla, which represents the start of the first US domestic lithium and a disruption to the current value chain,” Piedmont president and chief executive officer Keith Phillips said.
“The agreement highlights the strategic importance of Piedmont’s unique American spodumene deposit and confirms the trend towards spodumene as the preferred feedstock for the lithium hydroxide required in high-nickel batteries.”
He added the company will now accelerate its mine/concentrator development to support Tesla’s plans while expanding its mineral resources and potentially increasing its planned annual spodumene concentrate production capacity.
“We will simultaneously be advancing our plans to produce lithium hydroxide in North Carolina, using a combination of internally produced spodumene concentrate as well as material sourced from other producers around the world.”
Any lithium hydroxide produced by Piedmont will not be included in the agreement with Tesla with the company telling Stockhead that Tesla will have to convert the SC6 into lithium hydroxide elsewhere.
It added that it will be just one of four integrated spodumene miners and lithium hydroxide producers globally that will produce high-grade spodumene conversion for the US electric vehicle and battery storage markets.
Trading in the company’s shares were suspended early last week in response to an ASX query about a spike in its share price before the suspension was lifted today following the release of the sales announcement.
However, MineLife founding director Gavin Wendt cautioned that the key in this agreement was around pricing.
“At the moment we have no clarity around pricing, with the potential start date for sales not until mid-2022 at least,” he told Stockhead.
“The current environment for lithium is very much a buyer’s market, which means that big industry end-users are able to dictate price, which is very much putting the squeeze on lithium suppliers.
“The key will be margins on the product sold and at the moment that is a big unknown.”
Last week, Tesla boss Elon Musk voiced his preference for US-supplied minerals such as lithium and nickel at the company’s Battery Day event.
This was highlighted by its move to develop its own lithium processing method and laying a claim over 10,000 acres of lithium clay ground in Nevada.
It also goes some way towards addressing the ongoing concern about supply chain security that has been underlined by the COVID-19 pandemic.