Piedmont revises Tesla lithium sales deal with mixed results
The lithium developer’s revised deal with Elon Musk’s electric carmaker will bring forward potential revenues, but now includes a third party and cuts offtake and overall returns.
Piedmont Lithium has amended a deal with Elon Musk’s Tesla to bring forward the start date of the supply agreement by years.
But the new arrangement, the ASX-listed lithium developer said told investors, would also cut the offtake and link it to a joint venture controlled by Sayona Mining instead of its fully-owned project.
Under the amended deal, Piedmont will deliver some 125,000 tonnes of spodumene concentrate to Tesla from its 25 per cent owned lithium project in Quebec in Canada, between the first half of this year and 2025 at market prices. Sayona is the 75 per cent owner of the mothballed project, which the partners bought in 2021 and are due to restart this year at a cost of about $110m.
The deal replaced a more lucrative sales deal for Piedmont struck in September 2020. Tesla started 2023 with a 12 per cent fall in its share price after failing to meet production targets due to Covid-19 restrictions in China.
The previous deal was for a fixed price five-year supply of about 53,300 tonnes annually from Piedmont’s North Carolina deposit in the US, which is facing regulatory hurdles and class actions ahead of a final investment decision and permits. The proposed $US840m ($1.2bn) project is targeting production in 2026.
Piedmont is hopeful of securing further support from the Biden administration, which has supported its $US600m Tennessee lithium project with a $US141.7m grant.
About 80 per cent of the world’s lithium hydroxide is made in China, mostly by producers sourcing spodumene concentrate from Western Australia.
Piedmont president Keith Phillips said the electric vehicle and critical battery materials landscape had changed significantly since 2020 and the deal “reflects the importance of – and growing demand for – a North American lithium supply chain”.
“This agreement helps to ensure that these critical resources from Quebec remain in North America and support the mission of the Inflation Reduction Act to bolster the US supply chain, the clean energy economy, and global decarbonisation,” he said.
Piedmont’s deal with Sayona Quebec is to purchase the greater of 113,000 tonnes per year or 50 per cent of SC6 production, subject to market pricing with a price floor of $US500 per tonne and a price ceiling of $US900 per tonne.
The restart project is being funded from pro-rata cash contributions by Sayona and Piedmont, with each party having completed capital raises in 2022.
Last year, an exAustralian Tesla executive pleaded guilty to insider trading connected to the deal between the car maker and Piedmont in 2020. The Australian Securities and Investments Commission had accused Kurt Schlosser of buying 86,748 Piedmont shares before the deal was made public. Mr Schlosser had made a profit of some $28,000.
Tesla is not the only large US car manufacturer to have taken an interest in sourcing materials from Australian mining companies, with General Motors in October taking a stake in Queensland Pacific Metals at a 20 per cent premium in exchange for a guarantee of nickel and cobalt supplied from a planned Townsville plant.
Syrah Resources in December 2021 also said it had struck a deal with Tesla to supply the manufacturer with the majority of the natural graphite active anode material from a plant in the US.
Piedmont shares rose 0.5c to 66c, while Sayona rose 2c to 21c.