Piedmont Lithium: Positioned for Big Upside
Lithium on the Rebound—Here’s How to Profit
Tesla (NASDAQ: TSLA) became the most valuable US automaker of all-time in January.
In the first trading days of 2020, TSLA’s valuation surpassed Ford Motors’ (NYSE: F) 1999 record peak of $80 billion. The shares have continued to climb, topping a market capitalization of more than $90 billion, up more than $100 per share in just the first two weeks of the year.
In China, electric vehicle (EV) subsidies will remain steady this year, after several years of cutbacks, according to the country’s Minister of Industry and Information Technology, Miao Wei.
Globally, EV sales were reported at 2.1 million in 2018, up 64% from the year prior. Since 2013, sales have grown an average of 25% annually.
Automakers began retooling their production lines in 2018 to prepare for the next wave of EV sales.
Today there are already several mass-market EVs available with over 200 miles of electric range, such as the Kia Soul and Kia Niro. At the same time, brands such as Mercedes, BMW, Porsche, Jaguar and Audi are launching headline-grabbing high-performance electric cars — and putting real pressure on Tesla for the first time.
While the long-term winner in the auto market is unknown, and the rate of adoption uncertain, the trend is clear. And with it, lithium demand is on the rise.
The growth in the auto market, which is fast approaching mass market adoption, is largely driven by improvements in lithium-battery storage capacity and costs. And as this trend strengthens, lithium demand will soar.
In fact, lithium demand for EVs and other tech devices is expected to increase 650% by 2027, according to Roskill’s 15th edition market outlook report.
Learn About the Largest Lithium Provinces in the World
Lithium Stocks Moving Higher
Shares of Albemarle (NYSE: ALB), a global leader and industry bellwether, are up more than 25% from their December 2019 low.
Lithium America (NYSE: LAC) shares are up nearly 50% in the same period, while Livent (NYSE: LTHM), whose shares gained 55% from their 2019 low, has already surged more than 20% off its January low.
On the NASDAQ, Piedmont Lithium (NASDAQ: PLL) shares continue to move higher, up a solid 50% in the past six months.
One of only a handful of pure-play lithium companies listed in the U.S., Piedmont is developing a hard rock lithium deposit 30 miles west of Charlotte, North Carolina, and represents a highly compelling opportunity in both the short- and long-term.
Interview with CEO Keith Phillips
Prime US Location Positions Piedmont for Success
North Carolina was previously responsible for producing most of the world’s lithium from the 1950s to the 1980s. As both Albemarle (NYSE: ALB) and Livent (NYSE: LTHM), formerly FMC Corp, saw their mines mature, production was shifted from hard rock in North Carolina to brines in South America.
This shift opened an opportunity for Piedmont to accumulate its land package by optioning parcels from local landowners, piecing together a valuable asset in a prime location with excellent access to infrastructure and transportation, low-cost operating environment, and proximity to existing lithium chemical processing plants.
This prime location gives Piedmont’s project a significant strategic advantage as being one of the few domestic lithium development opportunities in what is the world’s second largest auto market.
“Perhaps the world’s best located lithium development project”
- Canaccord Genuity
Located close to both end-users and potential senior industry partners, Piedmont’s aim is to develop a strategic, U.S. domestic source of lithium to supply the increasing and accelerating adoption of EVs and battery storage.
Lithium on US Government Critical Minerals List
In May 2018 the U.S. Department of the Interior established a list of 35 critical minerals considered “vital to the Nation’s security and economic prosperity.” Citing its use in batteries, lithium is included as one of those 35 critical minerals, and efforts are underway to develop strategies to reduce the country’s reliance on foreign imports.
To this end, the U.S. government began working with automakers and lithium miners in mid-2019 to develop a national EV supply chain strategy.
While automakers are expanding their EV lineups and battery manufacturers are ramping capacity, investing billions in the new technology, they remain highly reliant on mineral imports.
China produces nearly two-thirds of the world’s lithium-ion batteries, compared to 5% for the U.S., and controls most of the world’s lithium processing facilities, according to data from Benchmark Minerals Intelligence.
U.S. imports of lithium have nearly doubled since 2014 due in part to rising demand from Tesla and others building battery plants in the country, according to the U.S. Geological Survey.
“We need to find ways to more efficiently develop our nation’s domestic critical mineral supply because these resources are vital to both our national security and our economy,” said North Dakota Senator John Hoeven, a member of the Senate’s Energy and Natural Resources Committee.
Piedmont is positioned to be a key domestic supplier as it moves into production in the coming years.
Mine Life Doubles After New Studies
Piedmont completed an updated scoping study over the summer which incorporated results from the expanded mineral resource update the company published in June.
The new study extended the project life to 25 years, including two years of concentrate-only sales and 23 years of integrated operations. This represents more than a 100% increase in life-of-project LiOH production compared with prior studies.
Accelerating Lithium Hydroxide Strategy
In response to strong interest from prospective lithium hydroxide customers, Piedmont is accelerating development of its lithium chemical plant and is compressing its project timeline into a single-stage, targeting lithium chemical production in late-2022.
This new timeline will effectively accelerate chemical plant development by one year while deferring the mine/concentrator construction start date by one year, resulting in integrated operations from day one.
This integration should lead to improved project economics given the higher margins associated with the lithium chemical business, while eliminating spodumene concentrate sales into the Chinese market.
The market has reacted positively to this news, and with key federal permitting secured in late 2019, Piedmont continues to move the project forward as projected.
Lithium hydroxide test work is underway, and a pre-feasibility study for the chemical plant is anticipated in the second quarter of 2020, with an integrated definitive feasibility study (DFS) and chemical plant permitting expected in the fourth quarter of the year.
“We have the only conventional lithium asset in the US and are on track to complete our DFS in the fourth quarter, allowing us to move full-speed ahead to having a shovel-ready project by the end of 2020,” commented Keith Phillips, CEO.
Concurrent to these activities, the company will continue to advance off-take discussions with numerous players in the battery supply chain. According to company management, marketing efforts related to byproduct quartz, feldspar and mica sales are advancing and strategic partnering options are continually being evaluated.
Buy Ratings from Multiple Wall Street Analysts
Analysts from Canaccord Genuity, Roth Capital, Eight Capital and Foster Stockbroking are already covering Piedmont, which trades both in the US on the NASDAQ and in Australia on the ASX.
As the company hits more major milestones in the coming months, these targets could very easily rise further.
With an estimated 25-year mine life, a current NPV of $1.4 billion, and an estimated steady-state EBITDA forecast of nearly $300 million per annum, shares remain a bargain anywhere under $10.
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