Piedmont Lithium pulls US government loan application as prices slump

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.

'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)