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CEO cites market conditions, plans to reapply for DOE loan

later

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Company faces financial stress amid 83% drop in lithium

prices

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Piedmont cancels Tennessee project, N.Carolina plans face

delays

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Company selling shares in Ghana project, seeks to offload

supply

By Ernest Scheyder

Sept 5 (Reuters) -

Piedmont Lithium ( PLL )

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 ( LAC ), 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 ( SYAXF )

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 ( ALLIF ), 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.