Piedmont Lithium Inc. (NASDAQ:PLL) Q2 2024 Earnings Call Transcript

Piedmont Lithium Inc. (NASDAQ:PLL) Q2 2024 Earnings Call Transcript August 8, 2024

Operator: Thank you for standing by. My name is Marabou [ph], and I will be your conference call operator today. At this time, I would like to welcome everyone to the Q2 2024 Piedmont Lithium Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I will now turn the call over to Erin Sanders, Senior Vice President of Corporate Communications and Investor Relations. Please go ahead.

Erin Sanders: Thank you, operator, and good morning, everyone. Welcome to Piedmont Lithium’s second quarter 2024 earnings call. Joining us today from Piedmont Lithium are Keith Phillips, President and Chief Executive Officer, who will provide the introductory remarks; Michael White, Chief Financial Officer, will then review our financial results; followed by Patrick Brindle, Chief Operating Officer, who will offer an update on our commercial activities and projects. Keith will then provide closing commentary before we transition to a live Q&A session. As a reminder, today’s discussion will contain forward-looking statements relating to future events and expectations that are subject to various assumptions and caveats. Factors that may cause the company’s actual results to differ materially from these statements are included in today’s presentation, earnings release and in our SEC filings.

In addition, we have included non-GAAP financial measures in this presentation. Reconciliations to the most directly comparable GAAP financial measures can be found in today’s earnings release and the appendix to today’s slide presentation. Any reference in our discussion today to EBITDA means adjusted EBITDA. Further, references to shipments are shipments of spodumene concentrate and tons are dry metric tons. Please note that copies of our earnings release and presentation, as well as a replay of this call, will be available on our website, piedmontlithium.com. With that, I’ll turn the call over to Keith Phillips. Keith?

Keith Phillips: Thanks, Erin, and thank you all for joining us today for Piedmont Lithium’s second quarter 2024 earnings call. As I like to do at the start of these calls, I will quickly reiterate our mission and strategy for those of you who may be new to Piedmont Lithium and our story. Piedmont is one of only two U.S. domicile lithium companies actively supplying the market today. Our mission is to be a leading North American supplier of lithium products to support the electrification revolution and the battery manufacturing industry. Our strategy is based on hard rock production. We believe spodumene concentrate represents the lowest risk and most commercially scalable raw material resource. Our goal is to play a key role in US efforts to reduce our country’s reliance on foreign nations for critical materials, which is crucial to the future of our nation’s energy security.

Turning to the key themes for the second quarter and today, you’ll hear about North American Lithium achieving steady state operations and other positive things happening in Quebec. We’ll also discuss our decision to consolidate our US lithium hydroxide development strategy. We’ll talk about our refined commercial strategy for the second half to improve pricing realizations while meeting shipment guidance, our progress toward our $10 mi 2024 cost reduction plan, and finally, an update on our theme [ph] from the first quarter, a year of two halves, with a significant curtailment in capital and investment spending in the second half, and also a significant increase in spodumene shipments in the second half of this year. Those are the key points we’ll cover and the through line that you’ll hear throughout this call is strategic perseverance.

Like many others in the lithium market, our focus in 2024 has been to position Piedmont to weather the prevailing pricing down cycle, preserve our assets, and fortify the upside potential of our global portfolio. Our second half 2024 plans are designed for two things; smart capital deployment and cost savings, so that when the lithium demand crunch hits and the market turns, as we believe it will, Piedmont will be in a ready position to leverage our business. So let’s look at our key focus areas by project. North American Lithium, already the largest lithium operation in North America, continues to demonstrate its potential as an excellent asset. In the second quarter, NAL again broke production records, while reaching new highs in lithium recovery and mill utilization rates.

The focus in the second half of the year is to continue steady state operations and drive reduction to unit operating costs. The [indiscernible] management team is also planning an update to NAL’s mineral resource update following additional high grade drill results in the second quarter. Obviously, as mineral resources and reserves grow, the potential for further growth in annual production at NAL will be evaluated. NAL has successfully cleared the gates of both, operational restart and ramp up, and is positioned to capitalize on any future lithium price recovery. For our Ewoyaa joint venture in Ghana, we have mandated the financial advisor to help secure our share of the project’s construction capital, that process has kicked off and the early feedback from potential off-take partners is very encouraging.

With approvals at Ewoyaa ongoing, we expect advances to Atlantic Lithium to reduce in the near-term, and since the off-take from Ewoyaa will no longer be required as feedstock for Tennessee Lithium, an off-take partner funding opportunity has been created for Piedmont. In the United States we’ve made a strategic decision, given market conditions and the receipt of the Carolina mining permit in the second quarter, we’ve made the decision to consolidate Tennessee Lithium’s planned lithium hydroxide capacity into a second train in North Carolina. Our plan is to construct the trains in a phased approach. We believe developing Carolina Lithium as a multi-phase larger operation is the right move for Piedmont and our shareholders to deploy capital and technical resources more efficiently.

The bulk of the front-end engineering work completed for the Tennessee facility is directly transferable to Carolina; they were always planned as twin facilities, and the 60,000 ton per year air permit that we continue to pursue with North Carolina’s Division of Air Quality would support the increased tonnage. With the receipt of the Carolina state mining permit, we’ve taken the opportunity to re-engage in active discussions with potential strategic partners. As you might imagine, the idea of an integrated spodumene hydroxide project in the South-eastern United States holds great appeal for a number of important players in the supply chain. In the near-term, our key areas of focus will be funding, permitting and approvals; however, we are progressing our development of Carolina on a conservative timeline with an eye on the dynamic market conditions.

Ultimately, higher lithium prices will be required to support the development of lithium projects, ours and others that will be necessary to meet projected demand. I’ll speak more about our thoughts on supply, demand and the market shortly. Now, Michael will provide a detailed discussion of our second quarter financial performance. Michael?

Michael White: Thanks, Keith. Turning to Slide 6, I’d like to provide a high level review of our second quarter results. We shipped approximately 14,000 dry metric tons for the quarter and recognized $13.2 million in revenue, resulting in a realized price of $945 per metric ton. This compares to a realized cost per metric ton of $900. Included in the realized price per ton were logistics costs, which are many times recorded as an offset to revenue depending on who bears responsibility for shipping, and a downward provisional pricing adjustment associated with shipments in prior quarters. We ended the quarter with $59 million in cash, and second quarter GAAP net loss was $13.3 million or a loss of $0.69 cents per share. And adjusted net loss was $12.7 million, or a loss of $0.65 cents on an adjusted per share basis.

Turning to Slide 7 for sources and uses of cash; our beginning and ending cash positions for the quarter were $71 million and $59 million respectively. During the quarter and as part of our 2024 cost savings plan, we reduced CapEx to a modest $3 million. We expect further reductions in CapEx in the third and fourth quarters of 2024 which I’ll discuss shortly. Within investments and affiliates, was a $5 million investment in North American Lithium, which includes completion of the crushed ore dome and marks finalization of restart CapEx for the operation. Let’s move to Slide 8. It’s imperative that we are appropriately managing our costs during the down cycle, and while we do not know how long the down cycle will last, we are committed and taking action to right sizing our cost structure in a thoughtful yet agile manner.

Let’s break this down into two areas. First, on our last earnings call, we discussed the commencement of our 2024 cost savings plan with a target of more than $10 million in annual run rate savings associated with our operating cost structure. Additionally, the plan included reductions in both, CapEx and cash investments and advances to our joint ventures. I’m pleased to note that we have achieved our $10 million run rate target, and we have been able to greatly reduce our second half 2024 CapEx and joint venture spending by supporting certain cost reductions and cost deferrals to 2025, and in some cases, beyond 2025. We expect to recognize the majority of our annual cost savings in the current year. As noted on this slide, actions to reduce our annual run rate savings included headcount reductions made during the first quarter, office consolidation at our headquarters in North Carolina, and cutting of certain third-party and internal spending.

Second, we are evaluating further reductions within our operating cost structure and capital expenditures, and we are working with our joint venture partners to lower planned expenditures during this down cycle. Lastly, we are executing our consolidation strategy of Tennessee Lithium into Carolina Lithium, as Keith previously mentioned. Now, let’s turn to Slide 9 for the second half outlook. We are maintaining our full year outlook for shipments of approximately 126,000 dry metric tons in 2024. As reported, we shipped approximately 30,000 tons in the first half of the year. We plan to ship approximately 96,000 tons in the second half which aligns with the production outlook and customer allocation of tons from our joint venture at North American Lithium.

Of course, certain factors including shipping constraints and customer requirements may impact the timing of future shipments. Patrick will provide a more detailed commercial strategy update in a moment. The key takeaway in our CapEx and investments outlook is that project related expenditures are greatly reduced compared to the first half of the year. Capital Expenditures remain on-track for our guidance of $3 million to $5 million in the second half of the year, and relate mainly to Carolina Lithium. Our joint venture investments in Q2 were lower than anticipated. Further with the restart of North American Lithium’s capital program having been completed and the ongoing approval process at Ewoyaa, we expect our joint venture funding to reduce substantially in the second half of 2024 compared to the first half.

Given those considerations, we have provided tighter ranges for our full year guidance in these areas. As always, our outlook is subject to changes in market conditions. And with that, I’ll turn it over to Patrick Brindle for a review of operations and project updates.

Patrick Brindle: Thanks, Michael. We can now turn to Slide 11 for an update on operational performance at NAL. As Keith noted, ramp up at NAL has gone well, commissioning of the crushed or dome this past quarter represents the completion of the capital spending of the NAL restart program that began in 2022. Steady state production at full run rate was achieved in June 2024 ahead of our second half 2024 forecast. Given its history, North American Lithium may be the least understood asset in the industry. It’s the largest active lithium operation in North America, with arguably the best location among all Canadian spodumene projects. Significant capital has been deployed at NAL over the past 15 years, and we are operating today with an improving cost profile, thanks to management’s tremendous efforts.

So, after two years of very hard work I’d like to extend a special congratulations for achieving the ramp up milestone to Sayona President Silvan Collard [ph], and his team, including Sal, Philippe, Sebastian, Lynn, Jean LucBernard [ph] and Patrick, and many others who played a role in getting us to this point. I’d also like to thank James Brown for his service as Sayona mining’s Interim CEO during the past year, and to welcome Lucas Dow [ph] and his role as Sayona’s Managing Director and CEO. We look forward to continuing our strong partnership and demonstrating the full potential of NAL over time. Moving to Slide 12, NAL increased production quarter-on-quarter by 23% to 49,700 tons of spodumene concentrate. Lithium recovery and mill utilization achieved new quarterly highs of 68% and 83% respectively.

With ramp up effectively completed, we expect continued steady state production levels for the remainder of the year, with incremental improvement to quarterly utilization rates. NAL’s drill program also returned additional positive results in the quarter with assays identifying multiple new high-grade lithium zones beyond the current ultimate pit shell. Management will use these data and focus on the potential for a significant upgrade to NAL’s mineral resources estimate. Turning to Slide 13 for a discussion on our commercial strategy and shipping plans. The forward price curves on this slide for CME lithium hydroxide and GFX [ph] lithium carbonate have been in contango for most of 2024, and this trend appears to continue into 2025. Starting earlier this year, we began working with a trading partner to capitalize on this situation.

We’ve structured spot sales beginning in Q2 of this year so that we can mitigate downside price exposure and avoid the m-plus one [ph] settlement pricing in a falling price environment which had negative consequences for us on shipments we made in 2023. We’ve noted that most of our 2024 shipments will be back loaded to the second half of this year, our target is to ship 96,500 tons from July through December. NAL is expected to produce at full run rate for the rest of this calendar year which supports our sales target. Also to help reduce our cost of sales, we are planning to make fewer shipments going forward with larger cargo volumes per shipment. We’re working in partnership with our Sayona-Quebec joint venture to co-ship cargo sold to Piedmont with cargo sold to third-parties.

Depending on the size of each shipment, we estimate that this may save us as much as $60 per ton on a CIF basis. Moving ahead to Ghana. In Ghana, the application to ratify the Ewoyaa mining lease has been submitted to the Ghanaian parliament. We’re continuing to wait on the outcome of that process, which we expect will be positive in due course. However, that timeline is now subject to the country’s legislative processes which are outside of our control. Meanwhile, as Keith mentioned, we have mandated a financial advisor as part of a funding strategy to raise our share of the development capital for Ewoyaa on a non-dilutive basis to Piedmont shareholders. Our general strategy is to mirror the efforts made by Atlantic Lithium to offer long-term uptake in exchange for funding to support our capital contribution.

Our process is going well with initial outreach calls completed, and we will continue with these efforts. Finally, and sadly, on July 9, 2024 Atlantic Lithium reported a fatality at the Ewoyaa project site. Following the accident, The Minerals Commission of Ghana conducted an investigation, and since that time Atlantic Lithium has resumed operations in accordance with Commission’s recommendations. This has been a difficult time for our partner, and we send our deepest condolences to their teammate’s family and friends. Lastly, in North Carolina, the second quarter receipt of our state mining permit marked a significant milestone for Carolina Lithium, which allows us to renew possible strategic conversations on the project. But as Keith noted at the top of the call, the development timeline for Carolina is dependent upon appropriately favorable market conditions which don’t exist at the moment.

We have been in a reduced spend posture at Carolina for a number of months, and will continue to maintain this position in the current market. During this time, we plan to focus on advancement of our remaining permits and approvals, work on phase development planning, and engage in strategic partnering conversations with interested parties. That concludes our commercial and projects update. With that, I’ll turn it back to Keith for an update on the market and our funding strategies.

Keith Phillips: Thank you, Patrick. I’d like to conclude our presentation with some thoughts about the market. At this point, we are all aware that lithium prices are depressed. However, given the historic cyclicality of the industry, we believe the current market dynamics are setting the stage for significant opportunity in the mid and long-term. Prices started the year low, began rebounding after the return from the Chinese New Year, and then retrenched. Those who have followed lithium for any period of time will tell you that the market is cyclical. It has been that way for the last decade, and we expect cyclicality to endure as the market continues to grow and mature. High prices were the cure for high prices in 2022 and 2023 with new supply entering the market.

As a result, prices are currently well below reinvestment economics which has caused a raft of disruptions across the project development timeline. Just in the last week, we’ve heard from two major producers that are slowing down their spend on growth projects to conserve cash. However, the key drivers of the energy transition remain intact. The global electrification industry continues to experience considerable growth for a maturing market. Lithium demand is growing significantly faster than other battery metals such as copper and nickel, and the regionalization of battery supply chain is progressing. Next slide? I said this before but the report of the lithium industry’s demise has been greatly exaggerated. EV sales continue to rise across the globe, 7.1 million EVs were sold globally in the first half of 2024 reaching an all-time high in the second quarter.

The US EV market also achieved records in Q2 with year-over-year growth of 11% and record high volumes. Total EV sales were also higher than Q1 sales by 23% exceeding industry expectations. And battery sizes are growing, with pack sizes forecasted to nearly double by 2040 as consumers demand longer ranges and larger vehicles. EVs are becoming more affordable; China has led in market adoption and offers multiple options for entry level consumers priced below comparable internal combustion engine vehicles. In the US, select EVs are beginning to reach price parity, and a growing competition to introduce new models should continue to add price pressure and further boost EV adoption. A host of other data is available, ranging from the growth of energy storage to the demand for lithium relative to other battery metals, but the trend is clear, lithium demand will continue to grow at an elevated rate, as will America’s need for a robust supply chain to support US electrification in the future of our Nation’s energy security.

Just a few days ago, Forbes published an article stating that the United States is approximately four times more reliant on China for critical minerals in the processing than it was on the Middle East at the peak of the Nation’s oil dependence [ph]. America is woefully behind in the race to build a domestic electrification supply chain, relying almost entirely on lithium imports to meet current battery demands; demands that are expected to grow by more than 35 times the current US lithium production capacity. Today, China produces approximately 60% of the world’s total lithium supply, versus only 2% for the United States. Point being, the demand for lithium is here, the future potential of the industry is strong, and the need to fortify America’s energy security to support the electrification revolution will only propel the growth potential of the domestic market.

Whether the objective is to support American manufacturing and jobs or global decarbonisation, US energy independence is an important bipartisan issue for electrification. Next slide? Shifting back to the current market dynamics to conclude with a few points. We all know that lithium markets have been challenging, and companies throughout the sector are positioning to navigate the down cycle. Piedmont is no different. We are laser focused on smart capital deployment and cost savings. We’ve achieved our annual run rate cost reduction target to date, and are looking at opportunities for further savings. Significant reductions in CapEx and investments are expected in the second half of the year compared to the first half as we complete important investments in Quebec and defer other spending where possible.

We are taking the necessary steps to maintain our position and preserve the upside potential of our assets. We have made smart fiscal and development decisions and are confident about our strategy for the current market. As a joint owner of the largest producing lithium operation in North America, we are positioned to capitalize on the upcycle we see coming. That concludes our presentation portion of the call. Thank you for the time and attention. We’ll shift to Q&A.

Q&A Session

Operator: [Operator Instructions] And your first question comes from the line of Bill Peterson with JPMorgan. Please go ahead.

Unidentified Analyst: Good morning, Keith and team. This is Bennett [ph] on for Bill. Given the strong 2Q production, spodumene production and comments in NAL has now reached a steady state as of June. I wanted to gauge how much further upside do you think can be achieved relative to 2Q production levels as we look through the back half of the year?

Keith Phillips: I think at NAL — you know, the target production at NAL is, say 210,000 tons a year, that — in that zip code; we’re operating at that level now. So I think if you think about that as kind of 50,000 to 55,000 tons a quarter, I think that’s something that should be sustainable going forward.

Unidentified Analyst: All right, that’s helpful. And then as we think about the cost structure with the crushed ore dome now complete, what are your expectations on further cost reductions through the back half of the year at NAL as well?

Keith Phillips: You know, the progress is really good there. Sayona put out their own financial numbers a week or so ago, and they’re accounting — obviously, showing things on an accrual basis, on a ton shipped basis, and really running inventory sort of through the system inventory from several quarters ago. But operating costs themselves — cash operating costs are improving meaningfully. And I think over the course of the next — and it will continue to over the course of the next year to 18 months, and should be sub-$700 a ton on a cash cost basis, delivered to Quebec City.

Unidentified Analyst: Great. Thanks so much.

Keith Phillips: Yes, no, just — I just follow-up by saying, in today’s pricing environment — the internal discussions we’re having around NAL and looking at budgeting going forward, we see NAL in today’s pricing environment as a cash flow breakeven or positive enterprise with obviously huge leverage to any increases. But in the past several quarters, it’s been obviously in ramp up and burning cash, and the partners have had to contribute into that; that is something we think is coming to an end.

Operator: Your next question comes from the line of Tyler DiMatteo with BTIG. Please go ahead.

Tyler DiMatteo: Keith, I wanted to start on the shift in the strategy here with Tennessee and moving some capacity to North Carolina. Is Tennessee completely shelved for now? And I guess the comments surrounding the appropriate market levels, surrounding the timing of North Carolina, I guess I’m just curious, you know, what does that mean? And how do you really think about that and the implications for the timeline there?

Keith Phillips: Yes. The way to think about Tennessee; I mean Tennessee and Carolina were always intended to be developed in some sequence based on different permitting timelines and market conditions. There was a period where it appeared that Tennessee is something we would prioritize first; that was certainly our view 18+ months ago. Ultimately, with my permit coming through in North Carolina, with market conditions being such that neither project is going to be developed in today’s market. And just fundamentally, the industry needs stronger pricing for big projects to be built, full stop. That’s across the board, it’s not a Piedmont matter, you’ve heard it from Al Marley [ph], you’ve heard it from Arcadanium [ph], you’re going to hear it from others overtime.

We’re just not at a pricing level where big, new greenfield projects can get built. That just doesn’t make sense, it’s not a good use of money for shareholders. So, as we thought about the development and we think about Tennessee really, as an independent chemical plant, we’ve always been planning and permitting 60,000 tons of capacity at North Carolina. So the opportunity to slot Tennessee in as train 2 in Carolina, from a longer term perspective, was something that just makes more sense for us economically. Frankly, in conversations with strategic partners, their interest was more significant at Carolina. There was interest in Tennessee, but at the end of the day the idea of having a plant in Carolina on top of a mine site, having an integrated facility all in one location is unique in the world, and the fact that it’s in the South-eastern US is exceptionally interesting to strategic parties.

So, it just made sense. And from a timing perspective for Carolina, we still have things to go through from a permitting and approvals perspective. But ultimately from a capital perspective — and it’s a large capital project, we’re kind of advancing toward the position where we’ll put funding in place, but that’s not going to happen this year, in this environment; it’s just not the right environment for us to lock in funding. So I think that we don’t have a set timeline for Carolina at this stage but I would say FID is very unlikely to happen in the next, say 24 months, just because the funding process will take that long and we’re working on a measured pace for that.

Tyler DiMatteo: That’s very helpful. And then kind of just shifting over to Ghana here. I guess — how do you think about the off-take timeline there for that? Maybe what you’re looking for, kind of what you’re targeting, and kind of how you’re balancing that project versus North Carolina now? I know you kind of pointed to lower lithium prices here, kind of making it tough for the industry across the board. Just kind of curious how you’re balancing the two of the projects there? And then the off-take for Ghana?

Keith Phillips: Yes, good question. I mean, so — listen, the Ewoyaa project in Ghana is a great project; it’s a lower CapEx, higher return on invested capital kind of project. Having said that, response means sub-$1,000 and the returns aren’t sufficient for either partner to accelerate development there. So it’ll happen, but it’ll need a stronger environment which I view is inevitable, it’s just a matter of time. So, I think the most important news I hear constantly that people are worried that we have a funding requirement at Ewoyaa right around the corner; that is not true. The project is not getting developed on that timeline. We still make — we’re still finishing off parliamentary ratification to permitting work, a lot of engineering work.

If the markets were to roar back, it’s possible that could be in kind of FID stage as early as a year from now. And that — and I’d love for that to happen, it is a great project. We’re confident we’ll have our funding in place for it, but I think it’s likely to take more time again, unless markets roar back. But the funding feedback is very positive. This is a 360,000 ton a year, low cost spodumene operation a mile from the Atlantic Ocean, it’s by far the best located lithium project in all of Africa. The parties who need spodumene, you can kind of guess who those are around the world, are all really interested in it. And many of those are large entities that have capital, they can essentially provide to us in the form of advances to help us fund our capital.

So my expectation is capital and development there will be deferred, but when it is developed we will secure all of our funding for that project from off-take parties on a non-diluted basis.

Tyler DiMatteo: Okay, great. Thanks for the color there, Keith. Really appreciate it. I’ll turn it back to the queue.

Operator: Thank you. Your next question comes from the line of Greg Jones with BMO Capital Markets.

Greg Jones: I wanted to follow-up on one of the prior questions around the Carolina timeline. Can you provide some guidance or estimation on when you think there might be an updated feasibility study that looks at this larger scale project or some details that might come out from the feed study at Tennessee that could be used to help guide capital and other parameters around the project?

Keith Phillips: Thanks, Greg. Yes, good question. We don’t have any current plans to publish an updated study; at some point we’ll do that. We’re constantly sort of updating our thoughts on that, and we’re currently doing some optimization studies. So, as an example, is 30,000 tons the right size for that plan or is something bigger or smaller, you know, for each train. We think it might make sense to make the trains somewhat smaller, say 25,000 tons; there’s really — it turns out there’s real capital efficiencies there. On the mine side, is 242,000 tons a year the right throughput or something a little different; better for a variety of different reasons. There’s a lot of work being done there. It’ll be — it’s kind of continuous, and we’re moving it forward I’d say on a disciplined basis; just — we’re not kind of burning too many engineering dollars.

We do keep updated models that we share with potential strategic investors and potential funding sources, but we don’t have any current plans to publish an updated study. I think it’s fair to say we published the Carolina DFS in December 2021, it’s fair to say capital has increased across the world, but certainly across the lithium industry since then. I think people like you, I think have that baked into their models. I haven’t taken a close look recently at where those are relative to where things may up and may end up, and we’ll see.

Greg Jones: And one follow-up question, please. When you think about the larger scale project at Carolina, how are you thinking about feedstock sourcing requirements? So you’ve got, obviously, the portion from integrated mine that would satisfy a portion of the production life. But under that larger scenario, where would you expect to source feedstock from?

Keith Phillips: Good question. Listen, I think the good news is there are a lot of spodumene sources available for American conversion project. So you think about Phase 1 in North Carolina is integrated, obviously, with our own mine; that’ll be developed probably a couple years behind Ghana. If you think about it that way, two or three years behind by the time it’s up and running. Train 2 would be two or three or four years behind that. So if we secured all the Ghana uptake with the third-party for five or six years, that material would free up again in time for Train 2. So that’s an opportunity. But there’s material coming from Quebec, there’s material coming from Brazil, there’s material coming from Australia, even they come into the US.

And the benefits are coming into the US in terms of avoiding VAT in China, just feeding the massive demand growth is in the US or such that we don’t really see any risk of being unable to secure spodumene on a longer term basis. And that would be something we would work on as part of that development for Train 2.

Operator: Your next question comes from the line of Matthew [ph] with B.Riley Securities.

Unidentified Analyst: You mentioned in the slide deck that you’re potentially looking at some opportunities to monetize non-core assets. Could you maybe provide some additional detail on that? And what exactly would you be kind of considering in terms of non-core selling? Thank you.

Keith Phillips: Yes, good question. Certainly, our core — our projects are core. So, we have — we continue to own shares in the Atlantic Lithium, for instance, which is a key partner. But the shareholding we have isn’t core. We have some land we own in the North Carolina vicinity that isn’t core to our project as is currently designed. So there’s a series of things; they don’t amount to the same quantum as what we were able to realize in the first half of the year by exiting our say, on a block at some of our Atlantic shares. But at the margin, you know, makes a difference and we’ll continue to look at those options.

Unidentified Analyst: Got it. Thank you for that. It’s clear. And just one follow-up for me. Kind of staying on Carolina, you guys obviously received the state mining permit recently. But could you remind me if there’s anything else that needs to be done on the permit inside of things in Carolina? If I recall correctly, I think there was still some stuff related to rezoning [ph] and other things like that. Could you just remind where all that stands currently?

Keith Phillips: Listen, we need an air — so it’s integrated projects, so you need the mine permit for the mining operation, you need air permit for the chemical plant operation; we hope to secure that in the first half of next year. As a reminder, we did apply for 60,000 tons coverage there. And there’s some other permits, and then there is the rezoning process. I mean, obviously, this is private land, it’s currently zoned principally residential or agriculture; we need to rezone it for industrial and mining purposes. That’s a process that will — we’ll advance at the right time. That may be maybe in 2025, maybe later, depending on how we progress with permitting and some of the engineering designs we’re doing. So, we want to be kind of fully transparent when we go through that process and really understand to trade 25,000 tons or the 30,000 tons, is the money going to produce 242,000 tons or some different number, etcetera.

So there’s work to be done. In the environment we’re in, I think you have to think about a project like Carolina where initial capital in the DFS was $1 billion; it’s certainly going to be higher than $1 billion. These are projects that are going to be — they require a different pricing environment, like we — like we frankly had over most of the last two years but don’t have today. So I think from a timing perspective, we’ll be monitoring — we’re advancing the project toward a decision but really being careful and disciplined about that. And ultimately, any development decision will be based on different market conditions and the availability of funding from strategic parties and lending sources.

Unidentified Analyst: Got it. Super helpful overview. That’s it for me. Best of luck moving forward.

Operator: Your next question comes from the line of David Deckelbaum with TD Cowen.

David Deckelbaum: I was curious just if we could clarify, progressing forward now if I think about the footprint that you would have, obviously, you have the benefits of NAL through the JV. And then, you know, you were to FID Carolina, and then integrate a hydroxide conversion facility, which would be sort of co-located with Carolina. Is the thought then that Ewoyaa would, at this point, not necessarily have a conversion partner associated with it? And as if you were to continue with Ewoyaa, would just be either using like a tolling model or selling spodumene concentrate?

Keith Phillips: Yes, no, great question. The way to think about, I mean — we initially invested in Ewoyaa as a really attractive mining project at relatively low investment costs for us to secure spodumene that we could eventually convert into lithium hydroxide here in the US. And that’s still kind of part of the plan, although I would characterize that as the longer term part of the plan. Today, we look at Ewoyaa as a highly attractive spodumene mining project where the CapEx and the DFS, I think, was around $180 million; it’ll end up being higher than that but it’s going to — the CapEx is going to be very competitive, the operating costs will be quite competitive, and we’re going to be a joint owner of that project and produce and sell spodumene concentrate into the market.

Our expectation at this stage will be, and I think that Atlantic Lithium, our partner, has a similar expectation. On their side, they’re working through their own partnering process with [indiscernible]. Is that we’ll each have our own off-take party, basically funding our share of capital in exchange for securing our share of the product. And in our case, we might be willing to commit all of our product for a period of time, four or five or six years. And if you’re — and there are parties around the world for whom that’s pretty compelling because — you know, just like we had the prior question about Tennessee — you know, when it’s sort of — Phase 2 of Carolina, when we build that second plan, it’ll be important that spodumene supply locked up, and the same will be true for other people that are developing projects around the world now.

So the availability material from Ghana is really attractive. So yes, you should — I would think about Ewoyaa a lot like — maybe today, you think about the NAL; we produce spodumene, we sell our material to people like Tesla and LG Chem, we’ll have other similar customers for the material from Ghana and that’s the business — that’s our core — for the time being, our core business is spodumene concentrate mining and production. But essentially we’re still focused on with partners developing the downstream side of the business.

David Deckelbaum: I appreciate that clarification. And maybe following up on that a bit for my second question. And I guess it’s a little bit philosophical, but as you look forward to Carolina, which is a bit of a crown jewel in your portfolio; is there a contingency where you would consider — and I asked this in the context of, there’s obviously some circularity in logic [ph] in North America with bringing on a spodumene concentrate mine without a conversion facility that would be IRA compliant. But obviously the conversion is the most capital intensive portion, and arguably the lowest margin in return. Is there a scenario where you would consider bringing on the mine in a staggered fashion whereas the conversion facility would be delayed years beyond that or does it always have to be coming online and coincident with each other?

Keith Phillips: We thought about different scenarios and we could obviously develop it in different scenarios. We think with Carolina in particular, it’s a good ore body in an exceptional location, and the location is particularly conducive to chemical conversion; and that’s what makes it interesting for strategic parties. So you think about battery companies, car companies, other mining companies and lithium companies; it’s a unique opportunity to build an integrated business. Ultimately, when we’re in a position to kind of outline what the funding will look like for Carolina Lithium, I expect you’re going to see very strong component of capital coming from one or more strategic partners. And ideally, with one of them being somebody who can contribute significantly on the technical side, on the downstream business as well.

So in an ideal world, we’ll be — and David, the format could take a lot of — the deal could take a lot of different forms. We could own 100% of the mine, and say 50% of the chemical plant; we could own 50% of everything, we could do a lot of different things. And those are the sorts of things we’re kind of mulling around with different strategic parties. But their interest isn’t in a spodumene supply in North Carolina; their interest is in a lithium chemical supply in North Carolina, in the South-eastern US. And the projects aren’t integrated basis holds together. I mean where we are right now in Quebec, NAL is doing great. But to your point when you’re producing spodumene in Quebec and you’re shipping it to the customers who are principally in China right now, there’s just a lot of economics kind of lost; it’s the transport industry and logistics industry.

And in North Carolina we can eliminate all that and capture it in the project that really improves the overall economics.

Operator: And your last question comes from the line of Noel Parks with Brothers [ph].

Unidentified Analyst: I just had a couple questions. I was thinking about in terms of funding; the hypothetical party you’ve been talking with for some time throughout the ups and downs of the lithium market the last couple years. To the degree that they’re side-lined now, how quickly, roughly could you envision that turning around and them arriving at satisfactory new terms? In the event we did get some clear visibility as to a rebound in lithium pricing. Is that something that is quarter’s worth of work? Or where do you think or something that could be put together quite quickly just based on work you’ve done to date?

Keith Phillips: Yes, good question. I guess what I would say is, the parties that care, for the most part, still care pretty intensively right now. We’re just not really interested in parting with substantial part of the economics based on kind of the current pricing environment. So it’s been really interesting over the last four or five years to see the interests of different parties evolve. We know the big car companies, we know the big battery companies, cathode companies, etcetera; and there is new — and there are some other groups that are now interested that really weren’t a couple years ago. It’s quite interesting how some of the people that were the most interested when we first started talking to partners about Carolina 2.5 to 3 years ago, one or two of them are still highly interested, one or two of them are less interested.

But there are new parties who are all of a sudden quite interested. So there’s no shortage of people the parties that are — that kind of want to pursue something, and it’s just really a question of bringing it all together. And our conversations continue; I mean, the team was in Tokyo and Seoul two weeks ago seeing potentially interested parties, and the interest is sincere and it’s pretty deep. But I think we’re — since we’re in a position where we’re not anxious to kind of develop the project right now anyway, from a funding perspective and a markets perspective, we just don’t feel we’re in a big hurry to bring that together. Again, then the nature of the strategic party we get may impact the nature of the debt funding we seek. And so it’s a kind of — it’s a little bit of a circular process, and an iterative process itself.

But overall, I think to bring it all together the right way, and to develop the project responsibly and really protect returns for our shareholders, we’re certainly two plus years away from FID, which we’re okay with this market in this market. But if the market was different; if the market hadn’t gotten to these levels, that could all happen more quickly. So the project is DFS complete, mining permit in hand, final step is kind of in reach in our perspective, and really just waiting like several other projects in the industry may be for a different market.

Unidentified Analyst: Fair enough. Absolutely. And just — in the discussion a little while ago, you, you mentioned just an example, the demand for lithium, for EV batteries, and everything is still definitely on the ramp and there is visibility into that. I just wondered — and sorry, if you addressed this earlier and I just missed it. Thinking about sort of the energy storage part of the lithium market is separate from mobility, just the whole sort of slug of demand that we’re going to see from continuing to handle intermittency integration of renewable sources as they’re integrating in the grid. It’s a topic we hear talked about a lot in some quarters and just barely mentioned in others, the broader storage market. So, any thoughts on how that might help the case for lithium sort of re-emerge sooner rather than later?

Keith Phillips: Listen, I think there is a lot of people that study the easy demand for lithium very deeply and not as many that do as much analysis on ESS but it is a huge market in itself, huge growth market. We’re not focused on it from a customer perspective, but obviously to the extent energy storage complexes are being built at scale and require lithium ion batteries or whether they require them not, they will use, they will prefer lithium ion batteries. For the most part, it just impacts in a positive way; demand for lithium overall, and that’s good for us, and that’s a trend that’s accelerating, not declining. So yes, I think what’s the important takeaway, and as we think about our company, where we are today, and in what we think is a depressed market is; lithium demand growth, whether it’s from EVs or continued growth in portables or ESS which is a huge opportunity, is really strong, 15% to 20% CAGR going forward for the next 5 or 10 years.

We had a couple of analysts from other firms send us their outlooks — their firm’s outlooks for demand growth for say, copper or nickel or rares [ph] or other things. You know, copper; people talk about copper which is — you know, it’s a great commodity, people talk about the shortages and how much more we’re going to need. Copper is growing 2% or 3% a year, lithium is growing 15% to 20% a year. We’re going to get through this supply and digestion, I think sooner than people think, and I think we’re going to be back on our front foot where the band [ph] growth is going to be hard to satisfy for a long period of time, and I think prices are going to respond to that. So ESS demand growth is very welcome, it’s not something we spend a lot of time focused on but I think overtime is going to become a bigger component of the business.

Operator: That concludes our Q&A session. I will now turn the conference back over to Erin for closing remarks.

Erin Sanders: Thank you, operator. That concludes our call today. We thank you for your time and interest in Piedmont Lithium. As a reminder, you can find our earnings release presentation and a replay of this call on our website. Thank you.

Operator: This concludes today’s conference call. You may now disconnect.