Tennessee approves Piedmont Lithium plant as complex Carolina project slows

Piedmont Lithium (NASDAQ: PLL; ASX: PLL) says the government has granted it permits to construct a lithium hydroxide plant in Tennessee although the cost has increased by a third.

The now-US$800 million project 265 km southeast of Nashville would process about 27,000 tonnes a year of the battery metal starting in 2026, Patrick Brindle, executive vice president and Chief Operating Officer of Piedmont said in an emailed reply to questions on Monday. The company intends to land a major investor and raise financing before construction starts next year, Brindle said.

“Our projected investment costs for Tennessee Lithium have increased over time as we have engaged in more detailed engineering work and refined our operational plans,” the COO said. “Material costs also have increased.”

The plant would more than triple lithium processing in the United States as scores of junior miners continue to enter the lithium space on the strength of government funding to minimize climate change and to reduce reliance on China’s metal processing. Canada alone has more than 400 mostly early-stage lithium projects eager to feed automakers. They in turn are ramping up production of battery powered vehicles, and power generators are pursuing ways to store more energy.

The Tennessee project is among other planned lithium processing plants, including in Nevada by American Battery Technology (US-OTC: ABML) and in the Midwest by privately held Stardust Power. The United States Department of Energy has already awarded a US$141.7-million grant to Piedmont.

The project’s economics are “robust” as forecasts from a feasibility study released in April continue to be valid, the COO said. The study projected an after-tax net present value of US$2.5 billion at an 8% discount rate, an internal rate of return of 32% and a payback period of 2.8 years.

It was based on a lithium hydroxide sale price of US$26,000 per tonne and spodumene concentrate costing US$1,600 per tonne over the project’s 30-year life. Lithium hydroxide was selling for US$39,000 per tonne this week, according to The Wall St. Journal, down from nearly US$70,000 a year earlier.

North Carolina project

Meanwhile, Piedmont is progressing through environmental and zoning approvals needed for an integrated lithium mining and processing site in North Carolina that was estimated in late 2021 to cost US$988 million and faces local opposition. Piedmont had wanted to start building it next year, but construction is delayed until at least 2025 and production to 2027.

“The opposition has not delayed our plans,” Brindle said. “Rather, our current first production target of 2027 best fits our expectations in terms of permitting, project financing, equipment deliveries, estimated construction schedules, and development timelines for other projects.” 

Piedmont is working on replies to North Carolina regarding a mining permit while the state reviews its application for an air quality permit. A site rezoning process with Gaston County can begin after the mining permit is issued, Brindle said. The company has been engaging regularly in the community and with project neighbours to provide information and mitigate concerns, which are usual for this type of project, he said.

“As an integrated spodumene-to-lithium hydroxide project, the permitting, planning and development is more complex than a single-purpose site,” he said.  

With the North Carolina project delayed, the company has invested in Quebec and Africa to secure spodumene for the proposed Tennessee plant.

The North Carolina-based company says it expects to receive its first commercial shipment of spodumene concentrate from the North American Lithium mine in Quebec by the end of the year. Piedmont will use it to make its initial shipment to LG Chem, which along with Tesla, has an off-take agreement with the mine. Piedmont owns a quarter of the mine and the rest is held by Sayona Mining (ASX: SYA).

African project

Piedmont is also working to own 50% of Atlantic Lithium (AIM: ALL; ASX: A11), where it has an offtake agreement to purchase half of the spodumene concentrate produced at the company’s Ewoyaa lithium project in Ghana. Atlantic Lithium is targeting US$185 million in construction to start in the second half of next year and production to begin in 2025, Brindle said.

“Capital expenditures increased during the diligent cost quotation process for the mine and concentrator build and following a decision to include dense medium separation units to stimulate early revenue generation,” Brindle said. “However, capital expenditure per tonne of annualized throughput only slightly increased, underscoring the significance of a recent resource upgrade and resulting efforts to improve product quality and throughput rate.”

Ewoyaa has 25.6 million probable tonnes grading 1.2% lithium oxide for 340,000 tonnes a year of spodumene concentrate over 12 years, according to a feasibility study following Australian regulations that was published in June. The project has an estimated after-tax net present value of US$1.5 billion and an after-tax internal rate of return of 105%, according to Atlantic Lithium.

While some investors have expressed skepticism on the staying power of lithium as battery technology evolves, Brindle is less concerned about pivoting Piedmont to new metals and markets within the next decade while lithium provides proven lightweight and dense-capacity batteries.

“We believe that technology will develop over time, and that some, but not all, concepts will be commercially viable in the long run,” he said. “We know that for the foreseeable future, North America needs exponentially more lithium hydroxide than the volume currently produced to meet projected demand for the next 10 or more years.”

Correction: An earlier version of this story incorrectly said the Tennessee project already has off-take agreements with Tesla and LG Chem. Those agreements are with the North American Lithium mine in Quebec, not the Tennessee project. The Northern Miner regrets the error.