Piedmont Lithium pulls US government loan application as prices slump
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[September 05, 2024] By
Ernest Scheyder
(Reuters) - Piedmont Lithium has pulled its application for a debt
package from a popular U.S. government loan program and is scaling back
ambitious expansion plans across two continents, as tumbling prices of
the electric vehicle battery metal force the U.S. miner to conserve
cash.
The retrenchment is among the starkest yet by a lithium company due to
an 83% drop in prices in the past year fueled in part by Chinese
overproduction and tepid EV sales rates that have caused industry
layoffs and spooked investors.
Once a darling of Wall Street and retail investors because of supply
agreements with Tesla and LG Chem, Piedmont has canceled its application
with the U.S. Department of Energy's (DOE) Loan Programs Office (LPO)
due in part to costs associated with the process, a company official
told Reuters. Details of the move have not previously been reported.
The move - which comes after Piedmont canceled plans for a Tennessee
lithium project that had received a $141.7 million government grant - is
fueling questions about where the company hopes to secure financing for
its flagship North Carolina project, projected to cost more than $1
billion.
Forgoing the grant was a gamble by Piedmont that it could get more
government money by applying for a loan through the LPO.
Piedmont in May told shareholders it aimed to secure debt financing in
the range of 65% to 75% of the cost of its North Carolina project, in
line with conditional loans the LPO has extended to Lithium Americas,
ioneer and others.
The loan review process requires that applicants pay for technical
experts who bill at an hourly rate as they advise the LPO. The LPO also
typically extends financing in tranches after expenses have been
incurred, according to two applicants not connected to Piedmont, putting
further financial stress on loan recipients.
In a statement to Reuters, Piedmont CEO Keith Phillips said the company
does not feel "a sense of urgency at this stage" to move forward on the
LPO application given market conditions and changes to its North
Carolina plans. He added that the company will "maintain discipline and
manage cash, which invariably means that our timelines for development
will" be delayed.
"We would expect to submit a fresh application at a point in the future
and we would look forward to working with (the DOE) when that time
comes," Phillips said.
Piedmont, which reported $59 million in cash at the end of June, laid
off nearly a third of its workforce earlier this year. Since last
October, the company has spent $1.9 million on DOE loan
application-related costs and stock and transaction-related expenses,
although it declined to break each item out individually.
The LPO said it was unable to comment due to confidentiality
requirements around applicant information.
Reuters reported last week that LPO applicants have been rushing to
close loans ahead of the Nov. 5 U.S. presidential election.
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Piedmont Lithium's headquarters is seen in Belmont, Gaston County,
North Carolina, U.S., July 16, 2021. Picture taken July 16, 2021.
REUTERS/Ernest Scheyder/File Photo
'LACK OF TRUST'
Piedmont was founded in 2016 in Australia and moved its headquarters
in 2021 to North Carolina, where it hopes to dig a 500-foot-deep
(150-meter-deep) open-pit mine and build one of the largest U.S.
lithium refineries.
Amid a surge in lithium prices, the company in 2021 invested in
Ghana and Quebec. In 2022, Piedmont said it would build a second
lithium refinery in Tennessee, plans that garnered the government
grant and praise from President Joe Biden.
Piedmont last month canceled its Tennessee project - which had
received all necessary permits - and said it would now plan to build
two refineries in North Carolina, where the company received a state
mining permit in April but must still obtain a zoning variance from
the Gaston County Board of Commissioners.
Piedmont has not applied for the variance and commissioners will not
consider any change until 2025 at the earliest, a delay from
previous expectations for the process to start two months ago.
Phillips, the CEO, told investors last month he does not know when
the North Carolina site could open.
"Our board's issues with Piedmont have never been about the EV
transition, but about our lack of trust in the company and its
project," said Chad Brown, chair of the county board of
commissioners. Phillips and Brown plan to meet on Sept. 11, their
first face-to-face meeting since 2021.
Piedmont would have to amend its state mining permit if it makes
significant changes to its operational plans, state officials told
Reuters.
In Quebec, Piedmont is a minority investor in Sayona Mining's North
American Lithium project. The project is Piedmont's only source of
cash, a reliance that in part led Macquarie analysts last month to
downgrade the company's stock.
Piedmont is also the second-largest shareholder in Atlantic Lithium,
which is developing a mine in Ghana that needs approval from the
country's parliament. Piedmont has been selling its Atlantic shares
to boost cash reserves, data from financial firm LSEG showed.
Piedmont is also searching for a customer to buy its portion of the
project's lithium, which had been slated to supply the Tennessee
refinery, Phillips told shareholders last month. Funds from that
offtake would be used to pay for Piedmont's portion of the Ghana
project's cost.
"The industry needs stronger pricing for big projects to be built.
Full stop," said Phillips.
(Reporting by Ernest Scheyder; Editing by Veronica Brown and
Marguerita Choy)
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