Shares in Australian and Nasdaq-listed lithium miner Piedmont Lithium soared this week after it announced on Monday that it has signed a contract to supply high-purity lithium ore mineral to US electric vehicle darling Tesla.
Piedmont says will supply Tesla with approximately one-third of its planned 160,000-tonnes-per-year spodumene concentrate for an initial five-year term, as well as additional quantity to be delivered at Tesla’s option.
The spodumene concentrate – a high-quality source of lithium – will be sourced from Piedmont’s deposit in North Carolina and marks the beginning of the first US domestic lithium supply chain.
News of the supply agreement came hot on the heels of Tesla’s much-hyped “Battery Day”, and according to Piedmont was only finalised earlier that day – September 22.
Piedmont shares nearly doubled after the announcement, leaping from 23c a share to 42c a share, and a market cap of nearly $A200 million, before settling down to trade at 38c a share.
The stock had been suspended for the previous 10 days pending this announcement, but still attracted a query from the ASX over the volume and jump in the share price before then.
Piedmont says talks with Tesla had begun in mid August, and it was confident there were no market leaps, and attributed the jump to a bullish broker’s report and general excitement in lithium stocks ahead of Battery Day.
Piedmont expect that the new supply contract will generate between 10% to 20% of the company’s total revenues from its proposed integrated mine-to-hydroxide project for the initial five-years of the agreement.
Tesla will be buying the spodumene concentrate at a fixed price so as to remove the volatility from a commodity that has steadily fallen in price since mid-2019. It is part of its grand plan to be a “vertically integrated” EV and battery storage company, and it is also looking at mining its own lithium with a new “salt” extraction technique from clay deposits.
“We are excited to be working with Tesla, which represents the start of the first US domestic lithium supply chain and a disruption to the current value chain,” said Keith D. Phillips, the president and CEO of Piedmont.
“The agreement highlights the strategic importance of Piedmont’s unique American spodumene deposit and confirms the trend toward spodumene as the preferred feedstock for the lithium hydroxide required in high-nickel batteries.
“We will now accelerate our mine/concentrator development to support Tesla’s plans, work to further expand our mineral resources, and potentially increase our planned annual spodumene concentrate production capacity.”