Piedmont and Tesla move to spot market pricing for lithium offtake as spodumene rises

Wed 04 Jan 23, 10:43am (AEST)
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Source: iStock

Key Points

  • Piedmont and Tesla move to spot market style pricing in update to existing offtake agreement
  • Spodumene auctions hit US$6,000 last month, Piedmont expects to commence sales in Q3 of this year
  • Agreement sees Piedmont supplying 125,000 tonnes of spodumene concentrate over 2 years

Piedmont Lithium (ASX:PLL) on Wednesday outlined its updates to the wording of a contract with US-listed and Elon Musk-run Tesla Inc. 

Piedmont and Tesla had already signed an agreement for the former to supply the latter with lithium spodumene. Piedmont Lithium is also listed in the US.

That agreement was amended this week with the company dropping a fixed price clause and adopting the language of the spot market. 

Tesla will now buy spodumene concentrate from Piedmont in line with the current price of the EV battery feedstock as the market price for the commodity fluctuates. 

 How much will Piedmont receive?

What, exactly, it will make investors remain to see.

Pilbara Minerals (ASX:PLS), which last year began conducting spodumene auctions, saw prices climb over US$6,000 at its last auction in December

Lithium player Pilbara Minerals noted in its FY22 results presentation that spodumene prices sat at US$5,480 per dry metric tonne. There is no hard benchmark for the price of spodumene concentrate outright. 

Piedmont’s US investors were originally bullish on the news overnight in the US trading session, but gains faded towards the end of trade. 

Spodumene still hot 

Tesla shares, meanwhile, are down some -12% on the back of a lacklustre Q4, with those results published overnight. 

Piedmont is aiming to supply 125,000 tonnes of spodumene concentrate (lithium hydroxide monohydrate) between 2023 and 2025. The company expects production to commence in Q3 of this year. 

Growing demand in US 

Piedmont chief Keith Philiips described a North American continent hungry for EVs.

“The electric vehicle and critical battery materials landscape has changed significantly since 2020 and this agreement reflects the importance of – and growing demand for – a North American lithium supply chain,” he said. 

Phillips also referenced the company’s harmonisation with environmental target initiatives from the Biden Administration. 

“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 U.S. supply chain, the clean energy economy, and global decarbonization,” Phillips added. 

Piedmont Lithium has a market cap of $270m and 11 brokers recommend a buy according to Market Index's scan of broker sentiment. 

However, the company is down -20% on a one month basis, and -15% over the last twelve months. 

A look at Piedmont's three month charts
A look at Piedmont's three month charts


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Written By

Jonathon Davidson

Finance Writer

Jonathon is a journalism graduate and avid market watcher with exposure to governance, NGO and mining environments. He was most recently hired as an oil and gas specialist for a trade publication.

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