• The IRA has turbocharged the US battery supply chain 
  • Major industry players like Piedmont Lithium, located right in the heart of all the action, are in prime position to capitalise 
  • We speak to Patrink Brindle on this opportunity as well as the developments taking shape at the company’s projects 

 

Policy shifts in the US have sparked a clean energy arms race, with industry bodies in countries such as Australia, Canada and the UK urging their governments to catch up or get left behind if actions aren’t taken quick enough to support domestic supply of critical minerals and downstream processing.

The Biden administration has injected nearly US$400bn in federal funding to clean energy and climate change initiatives, with some of the biggest winners of the Inflation Reduction Act (IRA) including OEMs, battery makers, and mining companies. All are gaining a huge advantage in the race to get critical minerals out of the ground quicker and into the batteries and technology needed for electric vehicles.

Between August 2022 and March 2023, major EV and battery makers announced cumulative post-IRA investments of at least US$52bn in North American EV supply chains – of which 50% is for battery manufacturing, and about 20% each for battery components and EV manufacturing.

The mammoth package has triggered a stampede by automakers to expand their US manufacturing operations, with BMW seeking to expand EV manufacturing at its plant in South Carolina and Ford planning to increase electric car manufacturing sixfold by the end of 2023.

It has also encouraged other automakers, like Tesla, to bring large-scale operations to the US as demonstrated by its move to relocate the Berlin-based lithium-ion battery gigfactory to Texas, where it will work in partnership with China’s CATL to manufacture next generation EVs in Mexico.

 

Piedmont in prime position

Major industry players like Piedmont Lithium (ASX:PLL), situated amongst the action in the heart of the US, are nicely placed to capitalise on this growing opportunity and participate in the transition to cleaner, greener energy.

The $1.65bn market cap company has the support of the US government through a conditional US$141 million grant to bring refining capacity online in the latter half of the decade at its Tennessee project.

This development is expected to help Piedmont evolve from a producer of spodumene concentrate at the North America Lithium JV project (NAL) with Sayona Mining (ASX:SYA), into a producer of lithium hydroxide, which commands a higher premium.

Construction is slated to begin this year ahead of production in 2025.

Before mid-decade, Piedmont is also expecting production from the Ewoyaa lithium project in Africa where it has an equity interest in Atlantic Lithium (ASX:A11) with the ability to earn a 50% ownership interest in the project.

Atlantic plans to license and permit Ewoyaa this year, with construction to follow, and production of spodumene concentrate set to start by the end of 2024.

Stockhead sat down with Piedmont’s Patrick Brindle to discuss the exciting developments taking place in the lithium market and at its different projects.

 

ASX companies are rushing to chase lithium over in Canada, what do you think this is indicative of?

“Canada has been a great destination for exploration of all pipes for a long time, the province of Quebec has been quite vocal and supportive in their desire to build out a battery materials ecosphere within the region,” he says.

“We have seen movement by the Canadian government at the federal level which mimics some of the things that the US government has done around the IRA and the Bipartisan Infrastructure Law, so it doesn’t surprise me to see ASX listed companies pursing opportunities in the area.

“What attracted us to Canada is the existing assets of North American Lithium, which were in care and maintenance as a result of very, very poor market conditions back in 2019.

“We were able to acquire that business together with Sayona in 2021 for a modest cost and we’ve been able to start it back up again.

“From our perspective, it is the best located spodumene project in Canada, it is much more proximate to population centres and the mature mining district of Val-d’Or and transportation corridors that some of the other projects.

 It is not the biggest, or baddest ore reserve in Canada but the other projects are much more remote and did not offer the same near-term cash flow potential that NAL did and now does.”  

 

What is your long-term view, do you think a number of these players have what it takes to get into production further down the track?  

“There’s a lot of spodumene resources being discovered and yet to be discovered but that’s not to say that the development timeline in Quebec is materially faster than other markets,” Brindle explains.

“It is still the same block and tackling type of work where you make a discovery, drill, deliver a resource, establish First Nations relations, and do all your environmental assessments, raise capital, and go through the vagaries and whims of the equities markets as prices rise and fall.  

“I think the biggest kick start to the lithium industry in Canada thus far has been our, together with Sayona, successful restart of the North American Lithium mine.

“It is really important that we complete commissioning on time, ramp up in a timely manner, and start making shipments to customers at the earliest opportunity.  

“But of the players that are there now, we as a perspective US converter would love to see additional spodumene come to the market in Canada over the coming years.  

“How fast they come, time will tell.”

 

Another big part of the mix is your projects in the US. What are you particularly excited about there?

“I think today, the most compelling element of development in the United States is the size and scale with which the electric vehicle industry is growing.  

“We estimate that lithium hydroxide demand in the US will exceed 700,000 tonnes per year by the end of this decade.

“OEMs and battery makers have made announcements of new construction of EV assembly and battery assembly plants in the US exceeding US$26 billion to be spent by the end of the decade.  

“To be in that mix in the size of that market and to be right in the heart of it is really, really exciting. 

“The second thing I would say that’s compelling about being in the US market is the access to an eligibility or some of the benefits under the Inflation Reduction Act.  

“In particular, for Piedmont lithium’s US operations, we believe we’re fully eligible for what’s referred to as the ‘Advanced Manufacturing Production Tax Credit’ – that gives us a 10% tax credit against our cost of production for lithium hydroxide operations in both Tennessee and Carolina.  

“That provides a substantial kicker to our estimated after-tax cash flow.

“America is really just waking up to what electrification means in terms of transport and we’re really excited about it.”

 

You’ve also got an interest in Atlantic Lithium’s Ewoyaa project. What attracted you to this project?

“The project is a diamond in the rough, what we love about that project is its logistics,” Brindle says.

“It is only 100km on the national highway from the project site to the deep-water port of Takoradi.

“Frankly, we think the cost of logistics from Ghana to our project at Tennessee Lithium would be somewhat less expensive than transporting the same spodumene tonnes from Beijing’s Bay to Tennessee.  

“It is a good ore body, it is high-grade, it’s coarse grain spodumene and it lends itself to low-cost dense medium processing at reasonably high recovery – we think there are a lot of benefits to being there.”

 

If there is one catalyst which could take lithium prices lower in 2023 what would it be? 

“The one thing I think about is within the current broad economic environment –  if we see US tip into recession, how long will that last and where will see sentiment go as a result,” he says.

“Does that have knock on effect in other markets, Europe in particular, and does that have a short-term softening of demand or sentiment around continued pressure on new vehicle purchases generally which slows the rate of EV adoption.  

“At the macro, I think about that as a headwind, I think we need to get past that, and we need to get past getting inflation under control and we need to get past the cycle of interest rate rises that we are in right now.  

“We need to get past those broader economic headwinds because the fundamentals of the industry remain unchanged.

“EV adoption rates are going to continue to rise and the capital investment being made by OEMs and battery makers in the US market as well as consumer sentiment longer term around wanting to increasingly buy EVS, those fundamentals are very, very solid. 

“In the near-term, I mean folks are still worrying about the price of eggs, let alone the price of lithium.”