Piedmont Lithium Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
November 7, 2023

There are 14 speakers on the call.

Operator

Ladies and gentlemen, thank you for standing by. My name is Abby, and I will be your conference call operator today. At this time, I would like to welcome everyone to Piedmont Lithium's Third Quarter 2023 Earnings Call. Today's call is being recorded and 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

Simply press the star key followed by the number one on your telephone keypad. Call. Thank you. And I will now turn the call over to Erin Sanders, Senior Vice President of Corporate Communications and Investor Relations. You may begin.

Speaker 1

Thank you, operator, and good morning, everyone. Welcome to Piedmont Lithium's Q3 2023 earnings call. The operator. Joining us today from Piedmont Lithium are Keith Phillips, President and Chief Executive Officer, who will provide the introductory remarks. Mr.

Speaker 1

White, Chief Financial Officer, will then review our financial results followed by Patrick Brindle, Chief Operating Officer, who will offer an update on our projects. Keith will then provide closing commentary before we transition to a live Q and A session. Jim. As a reminder, today's discussion will contain forward looking statements relating to future events the company's 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.

Speaker 1

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. Our Q and A. Please note that references to shipments are lithium concentrate and metric tons are dry metric tons. The call.

Speaker 1

Copies of our earnings release and presentation will be available on our website atpiedmontlithium.com. The operator. With that, I'll turn the call over to Keith Phillips.

Speaker 2

Keith? Thanks, Erin, and thank you all for joining us today for Piedmont Lithium's very first earnings the call. Q3 2023 has been transformational for Piedmont on many levels. 1st and foremost, 7 years since our founding, We have transitioned from an explorer to a developer to become a lithium supplier and generated our first revenue, Q2 milestones. I'll note that since this is our first earnings call, we will take a little time throughout the discussion to provide some background for those who are newer to the Piedmont story.

Speaker 2

Some of the areas we'll cover today, most importantly, production is ramping up at North American Lithium, our joint venture operation in Quebec. We made our first two shipments of spodumene concentrate in the Q3. We achieved strong gross margins and positive earnings per share Despite a difficult lithium pricing environment, we have an exciting development pipeline and a strong balance sheet. And as we think about future growth, I'll spend some time at the end of our remarks discussing our disciplined approach to funding along with our outlook on lithium markets. To that point, I thought it would be helpful if I started with a quick overview of Piedmont Lithium, our mission and strategy.

Speaker 2

Piedmont is one of only 3 U. S. Domicile lithium companies and our mission is to be a leading supplier of lithium resources for the U. S. EV Supply Chain, supporting U.

Speaker 2

S. Efforts to reduce our reliance upon foreign nations for critical materials and strengthening our national energy security. Underpinning Piedmont's mission, there's a strategy to focus on hard rock production by processing spodumene concentrate from assets we own or in which we have an economic interest. We believe the execution risk in spodumene concentrate is far lower than for some of the more exotic resources or chemical flow sheets that others in the industry are pursuing. We have been fortunate that the first two of our spodumene development projects have relatively low CapEx and potentially higher returns on invested capital.

Speaker 2

North American Lithium because it's a brownfield project, Aloyia in Ghana because it is a simple DMS only flow sheet. We ultimately aim to convert our spodumene concentrate production into lithium hydroxide for the U. S. Market with planned projects in Tennessee and North Carolina. We believe American consumers will continue to prefer larger vehicles, SUVs and trucks and they want to continue to drive long distances, All leading to requirement for more lithium hydroxide production in the U.

Speaker 2

S. Over the last several years, We have strategically assembled a global portfolio of 4 capital projects to build an integrated business. Our joint venture investments in Quebec and Ghana provide low CapEx, upstream resources and our planned projects in Tennessee and North Carolina are aimed at providing downstream and integrated operations. Through the development of this portfolio, we expect to one day produce an estimated 60,000 metric tons per year of lithium hydroxide That is compliant with the Inflation Reduction Act. To put that in perspective, there is only about 20,000 tonnes per year of lithium hydroxide produced in the U.

Speaker 2

S. Today. The first and foremost, we're focused on our hard rock spodumene strategy and revenue generation, which centers on our control of resources that ultimately will produce about 525,000 metric tons per year of spodumene concentrate. Patrick will talk more about our projects in a little bit. With that backdrop, let's segue to highlights of our Q3.

Speaker 2

Our key news, of course, is that we made 2 customer shipments this quarter from NAL, our JV operation in Quebec with operating partner Syana Mining. NAL began production in March of this year, joining a fairly exclusive group. By our count, there are only about 10 significant spodumene producing companies in the world today, Based principally in Western Australia, NAL is the largest operation in North America and obviously is very well positioned strategically. We own approximately 12% of Syana Mining and 25% of Syana Quebec, the joint venture we formed with Syana in 2021 that includes North American Lithium. We are not only an investor in the NAL operation, we are also its largest customer.

Speaker 2

Our offtake agreement with Sionna Quebec provides us with a greater of 50% A production or 113,000 metric tons per year, again whichever is higher, of spodumene concentrate at market prices with a floor price of $500 a tonne and a ceiling price of $900 a tonne for the life of the mine. In some ways, the agreement is analogous to a metals royalty or stream. So with respect to our Quebec partnership, we benefit in 2 ways. We recognize revenue and cost of sales through our offtake agreement And we separately record our 25% share of the JV's profit or loss as an equity method investment. In Q3, we generated revenue of $47,100,000 our offtake agreement and income through our equity investment, resulting in adjusted net income of $17,000,000 and adjusted earnings per share of $0.88 While we are pleased Piedmont is now making physical deliveries of lithium concentrate and achieving positive earnings, our results were materially impacted by the a 40% decline in spot lithium prices during the quarter.

Speaker 2

The majority of our offtake tonnage will ultimately be sold under long term contracts announced earlier this year, But our initial shipments are being made on the spot market and contract pricing traditionally occurs on a lag basis. So if you ship in September, you price the shipment based on the pricing in the months Leading up to the shipment date depending on what the parties negotiated. In this spot market, shipments are increasingly priced on a look forward basis with the final pricing Based on market parameters at or around the time of delivery rather than shipment, spodumene concentrate prices fell from over $3,500 a tonne in early July to $1900 today, directly impacting our quarterly results as our spot shipments are priced settled around the time of the customer receipt. In other words, we've had to bear the full brunt of falling prices in Q3, largely due to timing, but Michael will provide more details on the financials in his presentation in a moment. As we've been growing our business, we've been able to build a stellar team of experienced professionals to support our mission.

Speaker 2

From mining and process engineers to safety, environment and health experts and the legal, financial and other professionals needed to support our growing business, We've increased our team by more than 50% to 65 employees this year, and we're developing a culture of success, safety and commitment to sustainability. In fact, we issued our inaugural sustainability report in June of this year, which governs our ESG efforts as we develop our operations and advance our equity interests. With that, let me turn it over to Michael to discuss our Q3 financials and Q4 outlook.

Speaker 3

Thanks, Keith. Good morning, everyone. Let's begin with our Q3 highlights on the next slide. Revenue was $47,000,000 on sales volume of 29,011 metric tons as we made 2 customer shipments associated with Piedmont's offtake agreement with NAL. Our realized price and realized cost of sales on a per metric ton basis were $16.24 $805,000,000 and $805 respectively.

Speaker 3

Gross profit was $24,000,000 reflecting a gross profit margin of 50%. 3rd quarter GAAP net income was $23,000,000 or $1.19 per share. Adjustments this quarter included $0.41

Speaker 4

the call today. Related to gain

Speaker 3

on dilution of our equity method investments and $0.10 related to tax adjustments and to a much lesser extent other costs. Including these adjustments, we reported 3rd quarter adjusted net income of $0.88 per share. Operating costs were $12,000,000 and included $3,000,000 of non cash expenses. Adjusted EBITDA was $15,000,000 reflecting an adjusted EBITDA margin of 34%. Let's move to sources and uses of cash.

Speaker 3

We ended the quarter with $95,000,000 of cash on hand, up from $89,000,000 at the end of the second quarter. We generated $25,000,000 in cash from operations as we collected cash from our first sale. As part of a disciplined capital allocation approach, Capital expenditures were $16,000,000 $45,000,000 for the quarter year to date, respectively, quarter year to date, respectively, in our equity investments, which include Siona Mining, Siona Quebec and Atlantic Lithium, As well as in cash advances for the Awuya project in Ghana. This brings us to our Q4 outlook on the next slide. In the Q4, we expect to purchase and ship approximately 27,500 metric tons from our agreed upon offtake allocation from NAL.

Speaker 3

This puts us on track to deliver full year volume guidance of approximately 56,500 metric tons. Capital expenditures are expected to be in the range of $18,000,000 to $22,000,000 primarily for capitalized engineering costs and land purchases for our lithium conversion facilities and landfill for Tennessee Lithium, which Patrick will further discuss. Investments in and advances to affiliates are expected to be between $10,000,000 to 14,000,000 Turning briefly to the Quebec structure on the following slide, we thought it would be helpful to provide additional clarity regarding our ownership interests and Siona Quebec and Siona Mining and our offtake agreement rights from North American Lithium. Keith previously discussed our offtake rights And I covered our expected 2023 allocation of approximately 56,500 metric tons. There are 2 key points of emphasis I'd like to make on this slide.

Speaker 3

First, revenue and cost of sales as reported by Piedmont reflect only those shipments made by Piedmont to its direct customers and purchases made by Piedmont from NAL. 2nd, Piedmont does not consolidate the financial results of Sionna Quebec or Sionna Mining. Piedmont reports its share of income or loss from its affiliates our Q3 2019 results include our share of the Q2 2023 results from Syona Quebec and Syona Mining. Syona Quebec made 3 joint venture shipments totaling 48,211 metric tons during the 3 months ended September 30, 2023. However, Piedmont will report its share of the financial results of these three shipments as part of its Q4 2023 results.

Speaker 3

Now turning to Patrick.

Speaker 5

Thanks, Michael. We can now turn to an operational update and a discussion on the projects in our global portfolio, including our now producing North American lithium mine in Quebec. Our growth plan is to become a leading North American producer of lithium hydroxide within the 2020s. Fundamentally, We aspire to be a fully integrated lithium chemicals producer using spodumene concentrate from mines that we own and operate or in which we have a significant equity interest. We've completed the first stage of our plan with the successful restart of the North American Lithium Mine in Quebec, Canada in March of this year, And we continue to support our joint venture in the ramp up of the NAL operations.

Speaker 5

NAL shipped 48,211 tonnes during the period, including just over 29,000 tonnes shipped to Piedmont Lithium under our offtake agreement. NAL produced 31,486 tonnes of concentrate During Q3, a 6% quarter on quarter increase as the ramp up at NAL continues. Through the end of Q3, NAL produced 64,000 DMT of lithium concentrate on a year to date basis. Utilization at the NAL concentrator reached an average of 72% the Q1 and Global Lithium Recovery was 58%. NAL is targeting between 100 40,000 to 160,000 dry metric tons of concentrate production during the period from July 2023 to June 2024 and this target assumes the NAL process plant reaches full production levels by mid spring 2024.

Speaker 5

A number of capital projects are also being advanced at NAL to increase plant availability and process efficiency. A capacity increase is in progress for the tailing storage facility. This work should be completed by the end of 2023. A new crushed ore dome is currently under construction with expected completion in spring 2024. Completion of the dome will be fundamental to achieving full run break production throughput at NAL.

Speaker 5

The crushed ore dome should allow for improved overall availability in the operation and allow management to achieve their target mill availability of greater than 90%. Much of the NAL concentrator is vintage 2010 Control Technology, which dates to the original construction of the mine. The site team is currently working to upgrade a number of these control systems. I'd like to take this opportunity to commend the efforts of the management team at NAL and their ongoing efforts to bring NAL back into production as scheduled and the results that have been achieved to date. Shifting now to exploration activities, we are very encouraged by recent drill results at NAL.

Speaker 5

The 2020 drill campaign thus far has returned some exceptional drill results in the northwest direction of the current pit shell, including several thick high grade pegmatites discovered at depth. Lastly, we continue to evaluate the potential for completion of the lithium carbonate plant at NAL with our partner, Siona Mining. Now I would like to move the presentation forward to Ghana and activities at Atlantic Lithium. I should briefly note that I became a member of the Atlantic Lithium Board of Directors in June of this year. Atlantic Lithium's flagship project Awuya Is located in the Cape Coast region of the country approximately 70 miles from the Port of Takoradi, which provides accessible, low cost logistics for transporting lithium concentrate to the United States.

Speaker 5

Awuya is a relatively low CapEx and low OpEx project With estimated annual reserves based production target of 340,000 tonnes per year of spodumene concentrate, We hold off take rights for 50% of the annual production from the mine on at market based prices for life of mine, Which we plan to utilize as feedstock for our Tennessee Lithium project. We've recently achieved together with our partners several important milestones. In August, we exercised our option to acquire our initial 22.5% interest in Atlantic Lithium Ghana. In September of this year, the Minerals Income Investment Fund of Ghana or MIF agreed to acquire a 6% interest in Awuya U. S.

Speaker 5

Dollars 27,900,000. In October, Ghana's Ministry of Lands and Natural Resources granted Ghana's very first lithium mining lease to the Awuya project. The issuance of the mining lease represents a major milestone in the advancement of Awuya. This lease grants Atlantic Lithium the exclusive rights to carry out mining and commercial production activities over the application area for an initial 15 year term And is subject to parliamentary ratification and to the securing of the remaining environmental permits for the project. Under the terms of the mining lease, the government of Lugano will be entitled to a 13% free carried interest in Awuya and a 10% royalty rate.

Speaker 5

These terms combined with MIF's 6% equity stake results in a project level earning interest of 40.5% each Piedmont and Atlantic Lithium, but this does not impact our off take right to 50% of annual production. Atlantic Lithium expects the Awuya permitting and approvals process to be finalized in the second half of twenty twenty four with first production expected in the second half of twenty twenty 5 from our modular DMS plant and full commercial production to begin in 2026. Moving back to the United States, In Tennessee, we are designing the world class lithium hydroxide conversion facility, the Tennessee Lithium Project, Which we believe will play a key role in increasing the domestic production capacity for battery grade lithium products. At steady state operations, we expect to produce 30,000 tonnes Per Year of Battery Quality Lithium Hydroxide. We now hold all the material permits that we need to begin construction at Tennessee Lithium, And we've exercised our option to purchase the project site.

Speaker 5

Also, we've entered into purchase agreements for an adjacent foundry and an associated landfill. The landfill is expected to provide long term disposal capacity for the operations in our tailings if we cannot find a commercial outlet for this material. The foundry, idled earlier in 2023, gives us the opportunity to potentially reduce capital costs through Tennessee Lithium Through substantial reuse of existing infrastructure. Due to these acquisitions, we now plan to undertake a strategic review of the Tennessee Lithium Project, Which we expect will take several months. In North Carolina, we continue to advance plans for our foundational asset, the Carolina Lithium Project.

Speaker 5

Our goal in North Carolina is to establish a fully integrated mining, spodumene concentration and lithium chemicals TrinityRail's TrinityRail's Spring Campus that will be designed to produce 30,000 tonnes per year of lithium hydroxide at steady state operations. Our principal focus at this time continues to be working towards approval of our state mining permit application, which we submitted to the North Carolina Department of Environment Quality's Division of Energy, Mineral and Land Resources or Daimler in August 2021. We continue to work on our response to ADI 3 Received from Daimler earlier this year, and our response may require us to submit an extension request in order to finalize the containment plans for our waste rock stockpile. Looking forward, as we prepare to enter the rezoning and local approval process, which would follow receipt of our state mining permit, We have expanded our engagement with government officials and community stakeholders. We remain optimistic about the Carolina Lithium Project and its ultimate value 4 shareholders and all stakeholders, and we're very pleased with the strong support we've received from many local, state and national political figures for this project.

Speaker 5

This concludes my remarks today. And at this point, I'll turn the conversation back over to Keith.

Speaker 2

Thank you, Patrick. I'd like to conclude with some thoughts about the market and our funding strategy. To borrow a bit from Mark Twain, we believe reports of the lithium market's demise are greatly exaggerated. Despite some of the gloom and doom out there, 2023 has actually been a strong year for the EV market and for lithium demand. EV sales are headed for another record year globally.

Speaker 2

China record sales, Europe record sales, U. S. Record sales. And while U. S.

Speaker 2

Sales are further behind China and Europe, they have crossed the 1,000,000 mark the first time and are on pace to record a 40% increase from 2022. Bloomberg expects Tesla's Model Y to become the world's best selling vehicle of any type this year. These are huge milestones for the industry. Nearly every EV manufacturer has begun deliveries of a mainstream electric vehicle. Consumers now have a variety of choices, which has supported the growth in volume.

Speaker 2

You can see in the next chart on this bar chart, the size of batteries within the vehicles Are also growing. People want that longer range, particularly in a market like the U. S. Where customers prefer larger vehicles and regularly drive long distances. This has led to a nearly 50% increase in gigawatt hours deployed, which includes a significant growth in energy storage systems or ESS, Now representing approximately 13% of total battery demand and growing rapidly.

Speaker 2

We remain very bullish based on this data Combined with our conversations with OEMs and cell providers. And the EV revolution is really just getting started in the United States. We've led China and Europe for several years in this sector and now we're scrambling to catch up, but we're ready to take off. Over the past 2 years, more than $80,000,000,000 worth of battery manufacturing Projects or expansions have been announced $80,000,000,000 just in the U. S.

Speaker 2

Alone. These projects would require nearly 40 times the amount of lithium hydroxide capacity currently in the U. S. To fill demand domestically and current plant capacity including ours doesn't come anywhere near that mark. There have been a few announcements in recent weeks about shifting development timelines, but we believe these are short term adjustments related current market dynamics and not the deterioration of long term strategies.

Speaker 2

And new investments continue to be announced. Just last week in North Carolina, Toyota announced it is doubling down on its EV battery manufacturing project here, adding another $8,000,000,000 to its investment. Like most revolutions, the electrification and transportation will not follow a smooth path. Demand will have cycles and surges. Supply will come online in lumps, not straight lines.

Speaker 2

The supply demand tension may experience some temporary relief and then shift again. Now let's look at the supply story for a moment. On Slide 25, we borrow a chart from Canaccord Genuity's Equity Research team. I'll let you dig into the details on your own, but our industry has a history of delays and extended time frames, whether due to permitting or funding or development or ramp delays. It's safe to say that we expect many of the current development projects in the pipeline to come on stream later than currently planned, especially in an environment with capital cost inflation, higher interest rates and now lower lithium prices.

Speaker 2

Next, I'd like to touch on recent M and A activity in the sector. Most of this is occurring in Australia, so U. S. Investors may not be as current on the topic. Albemarle, SQM, Hancock, Mineral Resources, These are industry leaders and leading Australian mining entrepreneurs.

Speaker 2

These are some of the most knowledgeable folks in the lithium business and based on their recent M and A moves, They appear very bullish. Just in the past 6 weeks, we've seen 6 different aggressive moves by Hancock and Mineral Resources all around consolidation in the spodumene sector. Surely these folks feel the environment for lithium producers, particularly in spodumene is constructive for the foreseeable future. Before we close, I want to touch on the important topic of funding, specifically how are we planning to fund our growth. Our strategy centers on maintaining financial strength while pursuing low cost capital.

Speaker 2

Priority 1 is to build a strong upstream business on a capital efficient basis. With NAL being a brownfield operation In Awoyah being DMS only, the total capital Piedmont will invest here will be very modest relative to the economic upside we see. Downstream projects are different. They tend to require significantly more capital and have a higher level of execution risk. Our plans are to derisk these projects for our shareholders By combining support of U.

Speaker 2

S. Government funding with the support of highly capable strategic partners. Now let me get a little more granular on Slide 27, our final slide for today's presentation. We start from a strong financial position with $95,000,000 in cash and about $84,000,000 in shares of Zianna and Atlantic Lithium. We also expect to generate substantial free cash flow through our NAL Optic agreement.

Speaker 2

Even at current prices, we're at around a 50% gross margin. Our next development project is likely to be the Aloyo spodumene project in Ghana. The capital requirements for this project are modest and we've commenced discussion with various government entities to assist with the process. As an example, the DFC, the Development Finance Corporation in Washington has recent experiences helping to fund critical minerals projects in Energia, and we believe Eloyah is a poster child for that process. More to come on that in 2024.

Speaker 2

For our larger projects, an important consideration to some of the provisions within the Inflation Reduction Act. The 45x Manufacturing Tax Credit in particular will be a game changer for projects producing domestic lithium resources like Tennessee and Carolina Lithium. Separately, via the bipartisan infrastructure law, we were fortunate to be selected for negotiation of a 141 point $7,000,000 grant last year by the U. S. Department of Energy for our Tennessee Lithium project.

Speaker 2

However, as our detailed engineering plans have evolved Inflation across the capital equipment sector has grown. We've taken a fresh look at our funding plans for Tennessee and then decided to pivot away from the DOE grant to pursue an ATVM loan through the DOE's Loan Programs Office. If awarded, the ATVM loan would be expected to cover a significantly larger share the capital required for the project, enhancing the opportunity for strategic parties to partner with Piedmont on the project. We are also currently in the midst of an ATVM loan application process for the Carolina Lithium Project as well. With respect to partnering, we're working with our financial advisors at JPMorgan on a strategic partnering the process for Tennessee.

Speaker 2

It is early days, but as one might expect, there is robust strategic interest in a large well located lithium the Peroxide project in the Southeastern USA. This process will take some time and we will be patient in pursuing the best arrangements for Piedmont and shareholders. Transactions could ultimately take many forms, joint ventures, prepaid offtake, equity investments, etcetera. Before I conclude, I want to express my sincere gratitude to the entire team at Piedmont Lithium. We are a young company in an exciting sector and have recruited some exceptional people to our team.

Speaker 2

We have now announced our Q1 with revenue and positive earnings, and it wouldn't have been possible without these great folks. Thank you all. That concludes our presentation portion of the call. Thank you for your time and attention. We'll shift to Q and A.

Operator

CFO. And ladies and gentlemen, at this time, I would like to remind everyone in order to ask a question, press star 1 on your telephone keypad. To be able to take as many questions as possible. We ask that you please limit yourself to 1 question and one follow-up question. And we will take our first question from David Deckelbaum with T.

Operator

B. Cowen. Your line is open.

Speaker 6

Good morning, Keith, and congrats on the first earnings call here. Thanks for the time. Thank you. Yes, sure. Sorry about that.

Speaker 6

Yes, I was curious if we could talk a little bit more About the funding and financing path. One, I guess, do you have I know you said that the process with Your advisers is going to take some time. But do you have a target in mind for when you might have an application into the DOE And when you might be having an agreement with a financing partner or some sort of alternative. And I guess in context with that, Are you looking at just project specific financing around Tennessee Lithium? Are you looking for holistic financing with Tennessee and Carolina and the Brotherhood Piedmont Portfolio.

Speaker 2

Thanks, David. Good questions. We had submitted an ATVM loan application Tennessee prior to the receipt of the grant. Ultimately, and at the time you may remember, the CapEx was estimated to be $572,000,000 I think we updated that in the DFS to $809,000,000 There's been some continued inflation. So we expect the CapEx to be Higher than that number, we don't know how much higher, but somewhat higher.

Speaker 2

So that's the pivot from the grant to the loan where we've seen in some other situations people getting or expecting loans around 60% to 70% of the capital costs. So That would be very helpful for us. So we're focused on Tennessee first. It is permitted from a a timing perspective. If we wanted to, we could probably break ground in the next few months.

Speaker 2

There is more engineering work to do, as Patrick said, to Really understand the opportunities provided by the new Wapaca acquisition. There's some real CapEx synergies there that we want to develop. But fundamentally, we're not in a big hurry. We think we're bullish on lithium prices. We don't think we're in a current environment where prices are so high, we want to rush.

Speaker 2

It's more important for us to do it right, to de risk the deal, technically to de risk the project from a financial perspective. I expect this process to take 9 to 12 months to bring together, could be faster, could be longer, but I think that's the timeline that makes sense for us.

Speaker 6

Maybe that can dovetail into my next question. Just as you think about heading into next year, You highlighted the $92,000,000 of cash and certainly the expectation next year of 113,000 tons of shipments Through NAL and obviously we can put on whatever price we want there. How do you think about your capital commitments for next year and the flexibility that you might have in And just managing some of the project spends. Do you have sort of a concept of based on where pricing is today, what sort of capital commitments you'd have next year?

Speaker 2

Yes, we haven't provided guidance on that, but I would say we think we have a lot of flexibility. We've invested a lot Already in the engineering of Tennessee and Carolina. We've invested a lot already in the Awoyah project in engineering there. That work is really behind us. So we have the opportunity to slow that down while we bring funding together for all the projects.

Speaker 2

And the priorities for us are getting Awoia permitted and then beginning that construction process. That's probably a year away. So capital spending between now and then should be quite modest on Awoia. With Tennessee, our priority is really funding. Engineering work is very advanced.

Speaker 2

Front end engineering design is almost complete. We've really done a lot of work with our team and our advisors on that. So we can slow that down considerably and we intend to While we go through the partnering process, it's possible depending who our partner ends up being, they may have a slightly different point of view on some of the engineering aspects of the project. So we're sort of at a point where we're going to preserve capital. We're going to focus our energies on the funding side and bring that together.

Speaker 2

Similarly with Carolina, Carolina We'll be behind Tennessee in our current plan. So we're really in a fortunate position. We have a strong cash balance. At today's prices, we have 50% gross margins essentially with our offtake agreement with NAL. We can Our funding commitments on the capital side are the commitments themselves are very, very modest and really backdated toward the end of next year once we have funding in place.

Speaker 2

And our basic plan is to de risk these projects for shareholders by using third party funding to the extent we can.

Speaker 7

Appreciate the answers, Keith.

Operator

Thanks. You will take our next question from Joseph Reagor with Roth MKM. Your line is open.

Speaker 4

Good morning, Keith and team. Thanks for taking my questions.

Speaker 7

Just kind

Speaker 4

of want to follow a little bit On the questions around Tennessee. As you move forward in giving up the grant, Would it be possible to still use that grant if another form of funding came along or if you guys like officially moved on from it?

Speaker 2

Yes. Listen, the grant, we were very pleased and gratified to get the grant. At the end of the day, that's a program under the bipartisan infrastructure law that's really been done in 3 phases. So we were part of Phase 1. There's a second phase underway now.

Speaker 2

We've been encouraged by the DOE to apply for that program. Ultimately, you Can't have both a grant and an ATVM loan. They both come from the DOE. The initial guidance on that was different several months ago, but today it's clear you can only have one. Grant proceeds are terrific, but they're never going to amount to the amount of capital you could get under an ATVM loan and some of the provisions within the grants Make getting 3rd party commercial debt, project debt difficult in terms of so we've sort of taken the view that We will maximize our ATVM opportunity that will minimize the amount of equity we need to put into the project.

Speaker 2

It will make it it It'll put us in a stronger position relative to strategics in terms of kind of value of that opportunity, and we'll go from there. We may ultimately consider the grant program for Carolina. But again, Carolina is both a chemical plant and a mine, so the CapEx will be bigger. So that's more likely to be ATVM focused as well. Okay.

Speaker 4

And then on that note, when might you guys revisit the capital budget for North Carolina and provide like an updated financial study.

Speaker 2

Most of the CapEx in Carolina is For the chemical plant, we're working we've done a lot of work on the chemical plant for Tennessee. They're intended to be virtually identical. So whenever we are ready to update capital estimates for Tennessee, we should be in a position to update the capital estimates for the chemical side of the North Carolina plant. That will be where the biggest changes will be. Mining CapEx will also grow likely.

Speaker 2

That DFS, I think, was December 21. So certainly the mining CapEx will I would expect to grow as well, but it won't be a significant. We are working on that. We continue to do it. But we'll update it when we're ready.

Speaker 2

Realistically, that'll be most likely that'll be when we have funding secured. In the case of Tennessee, we don't currently intend to publish an interim updated study. I think what we intend to do is kind of announce maybe announce that contemporaneous with our funding probably later next year.

Speaker 4

Okay, fair enough. And then just real quick, what's the expected timing on the key release?

Speaker 3

This is Michael. We expect to we have until this Thursday, So we will file right either tomorrow, Wednesday or Thursday.

Speaker 4

Okay. Thanks. I'll turn it over.

Operator

And we will take our next question from Matt Summerville with D. A. Davidson. Your line is open.

Speaker 8

Thanks. Just a couple of quick questions. One more in the near term. Based on the price dynamic you mentioned between contract and spot and to start selling material under the contractual type of arrangements. Can you remind us What type of lag we should be thinking about between spot and how that rolls into ultimately the realized pricing through your contractual agreements.

Speaker 2

Yes. Thanks, Matt. I can't remind you because I don't think we've ever provided that guidance. And so I'm really not in a position to we're going to work hard as a company to be pretty transparent in terms of our realized pricing and realized costs. We're not going We're going to do our best to keep kind of confidential customer arrangements confidential.

Speaker 2

Ultimately, I would say, Our contracts do have customary pricing with respect to lags. Ultimately, our shipments under these contracts the company's comments are likely to begin in 2024 and kind of ramp up. So whatever lags are in, unfortunately, we'll not get the benefit of the prices of Say early in Q3. We're in the spodumene world of all the folks in Australia who announced earnings last week, those have been producers who've been producing for longer had shipments through the quarter, many presumably under contracts and we're able to realize lags. We had our 2 shipments sort of back end of the quarter with pricing determined in the 4th quarter based on current levels.

Speaker 2

And so that's the way we think about it.

Speaker 8

No, that's perfect. You actually answered my question. I was more curious whether or not you'll get any of that good or better, I should say, early Q3 pricing. At some point, Sounds like that's probably not going to happen. So the 27,000 tons of material being shipped in Q4, all of that we should assume is Shipped into the spot market then.

Speaker 2

Yes, that's correct. And I should mention, 27,000 is the estimate. Our agreement this year as people know is to get 56,500 tonnes from the joint venture. When you're loading a ship, Some things could be imprecise. It could be a little more, a little less than that depending on the size of the ship, the size of the holds, etcetera.

Speaker 2

But that's the rough guidance. And yes, those shipments in the second and the 4th quarter will be at spot.

Speaker 8

Got it. And then just lastly, Keith, just real quickly, do you have an updated the timeline kind of go forward cadence for Carolina at this point in terms of at least in the near term what you expect out of the permitting side of things? Thank you.

Speaker 2

Thanks. No, I think conversations we feel conversations are going well on the permitting front. We're in year 3 of that process. It seems like a very long time. It might be in some jurisdictions, just not really from an American perspective.

Speaker 2

We're hopeful we'll have significant progress next year, hopefully in the first half of next year, but we haven't have no more guidance than that. We do intend to respond to the ADI-three in this quarter and we'll have more on that into 2024. But just as you think about modeling that and think about Carolina. Yes. Tennessee and the DFS is $809,000,000 capital project is probably going to be a little bigger.

Speaker 2

Carolina is going to be Still because it's the chemical plant plus the mine, we're not going to have the capacity to do both at the same time. So in our minds, Carolina is a year behind Tennessee. That could shift, but that's our current way kind of we think about it, which gives us time on the permitting side and takes pressure off from that perspective.

Speaker 8

Understood. That's helpful. Thank you.

Operator

And we will take our next question from Austin Yoon with Macquarie Bank. Your line is open.

Speaker 9

Good morning, Keith and Tim. Congratulations on the first revenue and the profit report in the quarter. The question is a follow-up on the pricing. Just wondering if you could just shed a bit light on the contract and how often do you view the kind of pricing model because As you kind of highlight during the presentation, there was a shift on the pricing kind of mechanism in the September quarter. Should the lithium price rebound in 2024, do you see a risk of your customers kind of pushing back

Speaker 2

Austin, I'm not sure I understood the question, but let me try. I think what you're saying is if prices rebound in 2024, do we see our Was it the spot market or our existing contracts looking to kind of change the framework?

Speaker 9

Yes. Is that what you're asking? Well, in the September quarter, right, that the price kind of trended down. So what happened in the market was that The Downstream was pushing for price on delivery instead of a price on departure. If the price curve kind of invert and rebound.

Speaker 9

Do you see a pushback from your customers to change how the price is determined?

Speaker 2

No, it's a great question. To be honest, I hadn't thought about that a lot. We think about this in the context of Tennessee. So We're going to build Tennessee as a lithium hydroxide plant, essentially a conversion plant like the Chinese conversion plants, but better with MesoHutte Tech Flow Sheet. And we're going to supply that from simply from Awoia.

Speaker 2

That's our plan. But we're going to treat each of those businesses as independent entities. So we're going to be doing transfer pricing at market. And As we think about it, we think the current market dynamic is actually quite sensible. On one of the earnings calls last week, someone mentioned it takes 4 to 6 months to get rock from the mine into a chemical that you can sell.

Speaker 2

So if you're the converter, it's really important to have So the price of the raw material aligned with the price of the material you're going to sell. So we actually think the current formulation makes sense. That doesn't mean in a shifting market The converters might try to backtrack and go the other way. I think presumably, if prices are ramping up, that means it's a tighter market and there's competition from material and I think they'd be Maybe unsuccessful with that, but it's hard to say. Again, in a competitive market where prices are rising, I don't think yes, I think we'll have a lot more negotiating leverage.

Speaker 2

Any spot seller will at that point.

Speaker 9

Okay, cool. Thanks. Just really quickly on what are the key considerations during your search for the partner for Tennessee Development?

Speaker 2

That's also a great question. We are 1st and foremost, we're going to need capital. And we currently own 100 percent of Tennessee Lithium and we'd be willing to own less. We'd be willing to own anything down 50%. We don't want to own less than 50%.

Speaker 2

It all depends on what the economic parameters of an opportunity are. So we need capital. So that means we need companies with of scale who have capital. We're speaking to all the sort of people you might expect customers, OEMs, battery manufacturers, other spodumene suppliers who may have material they want to bring into the U. S.

Speaker 2

To get into the business and others, other mining businesses, etcetera. Some of those parties bring technical know how and experience that would be helpful or could be helpful. And so that's a component. As we think about derisking, obviously, spodumene projects are relatively straightforward to start up as mining projects go. Lithium hydroxide plants at scale are a relatively new phenomenon that folks in Australia have struggled certainly from a timing perspective.

Speaker 2

So Bringing in a partner who has technical capability would be a benefit. So that's something we're considering as well. We're speaking to all the folks you might imagine. And I think if we wanted to, we could move forward with a transaction reasonably quickly. But the best thing from our perspective is to be patient And to really get the best deal for shareholders and to that will take several months.

Speaker 9

Great. Thank you.

Operator

And we will take our next question from Greg Lewis with BTIG. Your line is open.

Speaker 10

Yes. Hi. Thank you and good morning and thank you for taking my questions. Keith, I just I really wanted to follow-up really on that last comment you meant. You just mentioned about bringing on a partner at Tennessee.

Speaker 10

Really in terms of the timing of that, it almost would sound like We would expect to get that ATVM loan ahead of a partner just because that probably improves the pricing terms that Piedmont to be able to get, is that kind of what you were trying to say?

Speaker 2

Yes. Listen, the ATVM process takes time, 9 to 12 months is a reasonable estimate. That's what we're assuming

Speaker 7

it will take.

Speaker 2

Certainly, if we brought in a strong strategic partner and that partner would say strong off taker. One of the considerations for any lender, including the DOE would be, who are you going to sell the material to, who

Speaker 10

is your

Speaker 2

customer, Having a big strong credible customer would be helpful. The customer may or may not be our partner, but those are all things we're working on and we'll bring them together. And I think in an ideal world, you're right, we would bring in a partner and we would finalize off take arrangements Prior to finalizing the ATVM process, we'll certainly be advancing the ATVM process without that complete. The DOE has a strong team. They understand what we're up to So they understand the nature of the product we're going to produce and the deep market there is for that.

Speaker 2

So I think that will be The off take and kind of partnering information will be information we can feed into the process midway and this certainly will reinforce it and it will be important to have that before it's finalized.

Speaker 10

Okay, great. And then I just had one more on the price paid from NAL. It looked like it was about $800 realizing pricing for spodumene has been volatile, but it was kind of below that ceiling of 900. Could you talk a little bit about that? And I'm seeing it's around the grade, but could you talk about that?

Speaker 10

And how maybe we should think about That cost going forward.

Speaker 2

Yes. The arrangement is the ceiling is $900 for 6% concentrate delivered to North Carolina. So there are a few moving parts. By far the most important is grade. So the average concentrate grade we purchased in Q3 was 5.3%.

Speaker 2

So if you take 900 times 5.3 divided by 6.0, you get pretty close to that number. There are some adjustments potentially around freight and around some other elements that are relatively immaterial, but that's the best way to think And then depending on who we're selling the material to and depending on the nature of the contract, we record the freight cost to get the material to the customer Either as a reduction of revenue or as an addition to cost and that could vary by quarter. In this quarter, One of our arrangements had the that freight cost counted as cost, which means the 806 is higher than it might be next quarter depending on the nature

Speaker 10

Super helpful. Thank you.

Operator

And we will take our next question from Matthew Keay with B. Riley Securities. Your line is open.

Speaker 11

Good morning, everyone, and thank you for taking my question. Most of mine have already kind of been touched on. But I was wondering if you could potentially just share your outlook Where you see spodumene pricing as we head into 2024. Obviously, tough thing to predict, but any color on where you think this market is kind of heading directionally Would be really helpful. Thank you.

Speaker 2

Yes. Thanks, Eric. Listen, to I think the lithium markets are very inefficient. I'm a believer in capital markets efficiency. So I always believe the best Forecast the future price is today's price.

Speaker 2

That's not a very helpful answer. We're bullish. We believe over time that most of the projects people are Modeling coming into production next year and in coming years will take longer to be funded to be built to ramp. This is just the general point of view we have, and we're bullish on electrification generally and on the EV Thematic globally. So we're positive.

Speaker 2

We don't really have a crystal ball in terms of quarterly or even annual fluctuations Depending on what I think major factors like what's going on in the world from an economic and security perspective will probably overwhelm some of the other things I've been thinking about. So sorry, that's not very helpful, but we're positive. We're very happy to have 50% gross margins even in this environment. And for our purposes, we model internally on a conservative basis. We want to be very careful to preserve our cash, But we are hopeful the prices will strengthen into 2024.

Speaker 11

Got it. Thank you. Thank you for that. And I just wanted to touch a little bit more on M and A. As you mentioned during your prepared comments.

Speaker 11

You said obviously seen a lot of announcements in Australia, but less so in the U. S. And Canada. Why do you think that is? And do you think the growing U.

Speaker 11

S. Industry for lithium could also use some M and A? And where could PLO kind of play in all of this?

Speaker 2

Thanks, Matt. Sorry, I was reading the list of questionnaires here incorrectly. So apologies for getting your name wrong. Listen, I think most of the spodumene produced in the world is in Western Australia today. There are a lot of exciting projects over there.

Speaker 2

Australia, Western Australia is an active mining market. There's some very deep pocketed, very capable, aggressive mining entrepreneurs over there putting a lot of money to work. By definition, there are fewer opportunities in the U. S. For M and A.

Speaker 2

There are fewer kind of advanced projects. But I think certainly things come here. In our conversations with the Australians, for instance, including some of the people that have been involved, they're all focused on the U. S. And Canada as sort of the next frontier.

Speaker 2

It's been a lot of activity in Quebec. There just aren't many spodumene projects in the U. S. And people are principally the mining folks are principally focused on spodumene just from a to risk management perspective and ease of getting into production. Piedmont has been an acquirer.

Speaker 2

I mean, we obviously were Quite fortunate to make well timed investments into Sayana and Atlantic Lithium and their projects. We've looked at we've been approached with literally over a 100 other opportunities in the interim. The only one we've invested in was the Killick project up in Newfoundland we announced last month, very modest upfront capital investment, which we think big upside. I think as we de risk our story and I think this is an industry that's probably in the second or third inning of its evolution. And as stories like Piedmont advance and become derisked and projects receive permits, receive funding are being built and kind of come into production, I think you'll certainly see significant consolidation in the industry and we may or may not be a part of that down the road.

Speaker 11

Got it. Thanks for that color, Keith, and best of luck moving forward.

Speaker 2

Thanks.

Operator

We will take our next question from Eric Boyes with Evercore ISI. Your line is open.

Speaker 12

Good morning. Thanks. Two questions. First, back on the clarification that now price realization occurs at the time of delivery, not shipment. So what is the typical timeline from shipment from now to delivery to a customer by a trading company?

Speaker 12

And then Given that timing, is it possible we occasionally see a shipment in the given quarter that isn't kind of realized until the following quarter?

Speaker 2

Yes, great question. So in the Q3, the joint venture had a shipment through a trading company. Piedmont had 2 shipments. And interestingly, they each went 3 separate ways as you look at the globe. 1 of them went around the coast of Africa because the Panama Canal was clogged, one went through the Panama Canal.

Speaker 2

Our most recent shipment went through the Northwest Passage. And so it was really that was fascinating to me that the latter shipment Got there in 18 to 20 days. The I think initial shipment from the JV took 60 or 70 days, if I'm not mistaken. So it varies. And just to clarify, I should Spoken more precisely earlier.

Speaker 2

It's not written in stone that the price has to be at delivery date. The price could be in one of the shipments we had, The price was very close to delivery date. In another, the price was actually set with reference to delivery date, but a couple of weeks prior. So if delivery date was, say, September 30th, the pricing might be set at September 15th retroactively. In another, it's at the opposite way, kind of forward.

Speaker 2

So this is a negotiation you have with the customers through the in our case, through the trading companies we're working with. And there are always several buyers for any shipment, which is helpful. And you make the decision you make and you hope it works out in the end, but you really don't know Until the final price is paid.

Speaker 7

Okay, understood. Thanks. And then my

Speaker 12

second question would be kind of given The price volatility that we've seen and more specifically, in the differential between hydroxide and spodumene. Is there any thought in linking Piedmont's off take price at Awoia to hydroxide to preclude some of that differential risk as it pertains to Tennessee? Thanks.

Speaker 2

Yes, it's a great question. On the pricing slide early in the deck, the reason we included the three lines, fast markets, Platts and SMM for hydroxide and spodumene and there's a 3rd graph not on that page for carbonate. There are really 9 different benchmarks you can contract with a customer for. And in our experience, the customers in China, the conversion plants, they want to contract based on the chemical they're producing. So if they're producing hydroxide, They run through the math of GF hydroxide prices X.

Speaker 2

I need Y tons of spodumene. I've got VAT of Z% etcetera. They go through the math and say, here's what we can pay and that's how they calculate it. If they're a carbonate plant, they use carbonate and our shipments have been based on different things. So I think In terms of how it affects Tennessee, this has been a very good learning experience for us.

Speaker 2

Our arrangement with Atlantic Lithium is that we will pay market prices. It's a pretty generic term as you can tell. We're very interested in having our market prices be linked to the hydroxide we'll ultimately produce And both from an economic perspective and also a timing perspective. Over time, it should all even out, but that should be something I think I think Atlantic would be interested in as well. So we're some time away from we won't be in construction in Atlantic for another year or so.

Speaker 2

We won't be in production for a couple of years, but That's a detail we'll work out. I'd like to see Tennessee Lithium's spodumene input cost be market prices linked to the hydroxide price. We'll receive a Tennessee Lithium Around the time we'd be shipping material. I think it's just a very sensible thing and that should work for both parties.

Speaker 12

Makes sense. Thank you.

Operator

And we will take our next question from Chris Kapsch with Loop Capital Markets. Your line is open.

Speaker 13

Hey, good morning. So I jumped on a little late owing to a scheduling conflict. So apologies if you touched on some of this already. But Sounds like you alluded to a variety of continued and ongoing strategic discussions with various players in different elements of your business. I'm curious as you engage with downstream cathode or battery or automotive OEM players and they're and talking about their needs, What are they what's most important to them?

Speaker 13

What are they most focused on? Is it regionalization supply chain, security supply? Is it The ability to hit battery grade specs just and also just are those conversations still predominantly focused on hydroxide over carbonate even with the No more momentum, with LP gaining share at least in over in Asia.

Speaker 2

Great question. Listen, I think certainly we're focused on hydroxide. The people we're speaking to need hydroxide. Some will need some carbonate as well, but Most of the spodumene in the world will go into hydroxide. We certainly think it's the right thing for the U.

Speaker 2

S. Market. So we're hydroxide all the time. I would say parties are I'd say the principal area of focus for people frankly is America. I mean, we're in Tennessee, in the Southeastern U.

Speaker 2

S. Surrounded by EV plants that are being built, cathode plants that are being built in Tennessee, South Carolina and elsewhere. With the backing of the Inflation Reduction Act, Everybody, the big Korean battery companies, the big U. S. And foreign OEMs, they all want to be here.

Speaker 2

They need to be here in scale. There's just going to be a dearth of lithium hydroxide available domestically. That's a problem. Even without the IRA, that's a problem. But with the IRA and with the benefits of having domestic supply.

Speaker 2

It's a big issue. Adding to that, within the IRA, there's the 45x tax credit, which makes American tax paying entities. It gives a tax benefit to American projects that's very substantial, more so than if the project were to Australia or Canada or somewhere else. So people are very excited about that and to accept they're going to invest a lot of money in a big capital project. They want to make sure the economics make sense.

Speaker 2

The final thing I'll say about Tennessee, our experience selling spot spodumene has been really educational in terms of the importance of Tennessee. If you are a spot seller of spodumene concentrate today, the only buyers in terms of producing the only buyers are the Chinese converters. There are no others. So obviously, the Chinese plants don't benefit from the IRA from a 30D pricing perspective. There's significant VAT paid and bringing material into China.

Speaker 2

So the spodumene everyone in the world is producing is worth way more to them and to us going into a place like Tennessee than is going into China. And the people in the industry know that, the car companies, the battery companies And other spongymeid suppliers. So it's really interesting. We've been really gratified to kind of the more we learn, the more strategic we're confident Tennessee is for a lot of people.

Speaker 13

Got it. That's helpful. And just as a follow-up and also based on your engagement with these players, Obviously, public equity markets right now, sentiment is sort of subdued to say the least. But just Curious and I know your answers will be biased, that's fine. But just curious if your engagement with these players, If there's any indication of some of the perceived negatives that are feeding into sentiment like slower EV demand or maybe push back on the IRA and the spending associated with that.

Speaker 13

Is there any sense of that Adverse sentiment feeding into those conversations you're having with those strategic. Thanks.

Speaker 2

Thanks, Chris. No, I would say not at all. I mean, the strategics who are long this business are committed and They may or may not adjust their timelines going forward, but they're committed. They're very supportive. They understand the strategic imperative and the strategic attractiveness

Operator

And we will take our final questions from Noel Parks with Tuohy Brothers. Your line is open.

Speaker 7

Hi, good morning.

Speaker 2

Hey, Noah.

Speaker 7

Just had a couple of things. One is Thinking about the processing business in particular and maybe earlier in the Piedmont story, the mining room particularly large, Tennessee, the standalone processing business is part of that fully integrated vision that you have. So, as we look at the ramp up in demand and then ultimately production, I just was wondering if you could talk a little bit about How you see the margin evolving? And I'm wondering, is it a case when you look at scenarios that sort of when we hit That peak undersupply point, is that sort of going to be sort of like a historic bulging in margin right there with prices? Or is it more do you look more to further out when you are really at fully built up scale, The industry is closer to production scale.

Speaker 7

So I was wondering how you think about that?

Speaker 2

Yes, Noel, it's a good question. We've gone through a few cycles here since I've been in the lithium business and down, up and now Prices have come down again. And certainly a year ago, everybody in the sector was collecting very substantial margins, really, Especially on the upstream side. And so for a lot of people, questioned our strategy about ultimately going downstream. We have a view that in the long run, Downstream margins will be substantial and more stable, and certainly more stable than upstream margins.

Speaker 2

We think being a provider of the specialty chemical lithium battery quality lithium hydroxide will earn us a premium multiple in time once we're at that stage. It's obviously several years away. I will say in today's market and this is important consideration as you think about supply, anyone modeling supply. In today's market, to build a 30,000 ton hydroxide plant, if the capital in our DFS was $809,000,000 and that was some time ago and you just think about roughly $1,000,000,000 capital project, to spend $1,000,000,000 to raise $1,000,000,000 to build that plant today with the current margins implied by prices. People talk about the incentive pricing required is very tough.

Speaker 2

I mean, it will happen in Tennessee because of the ATVM program and because of the strategic nature. I don't know how you would do it in some other parts of the world where you didn't have those two things. It would just be really tough. So what that means to me is margins in the downstream side have to expand. They just have to.

Speaker 2

I mean, especially if the world is going to demand material from outside of China, they're going to have to expand. China margins The CapEx in China is considerably lower and thus we've seen some global, including American companies invest heavily in China in the past. We think in the long run, we want to be in the U. S, but we think those margins have to expand. We think they will.

Speaker 2

And Yes, but it's going to be volatile and lumpy between now and then, but we think that it has to be a higher margin business than it is today.

Speaker 7

Great. Thanks. And then I wanted to turn back to NAL. I wondered if you could drill down a bit more on the new drilling up there, and was curious The good results you've had recently, I think you said to the Northwest. Were those just In line with predrill expectations or somewhat of a surprise?

Speaker 7

And also wondering if you could talk a little bit about how the construction Projects on-site like, for example, the Dome are coming.

Speaker 5

Yes. Thanks. This is Patrick. I would say that drilling results were pleasantly Surprising, we had indications from earlier data that there may be positive drill results Trending in a Northwest direction from the existing Fitshell. Of course, over 2023, we've undertaken a broad drill campaign to do 2 things.

Speaker 5

1, continue to upgrade mineral resources within the existing pit shell from inferred to indicated category and then convert them to ore reserves. But I think based on the discoveries to the Northwest to date, we'll expand the drill campaign going into 2024 And probably reevaluate pit design on a long term basis. I would say what we've seen thus far probably does not impact the operations over the next 1 to 3 years, but is really medium to long term potential to either expand capacity or increase mine life at NAL. Shifting to capital program, Again, the two main things that we are focused on over the next 6 months are completion of the tailing storage facility lift before the end of this year. That will give us several years of tailings storage expansion at the mine.

Speaker 5

And then the completion of the crushed ore dome, which we hope is completed in April of next year. This is the most significant capital project that remains from the NAL restart program. This will allow us to disconnect the operations of the crushing plant the company's production from the mill, which ultimately then should result in increased mill availability. This is the main driver for both improvements in product quality

Operator

And that concludes our question and answer session for today. I will now turn the call back to Ms. Erin Sanders for closing remarks.

Speaker 1

Thank you, Abby, and thank you everyone for joining us on this call this morning. If there are any remaining questions, we are happy to arrange follow-up calls with Keith and the management team.

Operator

CFO. And ladies and gentlemen, this concludes today's conference call and we thank you for your participation. You may now disconnect.

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Key Takeaways

  • First revenue milestone: Piedmont recorded Q3 sales of $47.1 M in spodumene concentrate from the North American Lithium JV, delivering 50% gross margin and adjusted EPS of $0.88.
  • Spot price headwinds: A 40% decline in spot lithium prices during Q3, combined with delivery-based pricing, depressed realized revenues on initial shipments.
  • Offtake and equity upside: Piedmont secures a minimum 56,500 tpa of spodumene concentrate from NAL under $500–$900/t floor/ceiling pricing and holds 25% JV equity for future earnings leverage.
  • Strong balance sheet: The company ended Q3 with $95 M cash and ~$84 M in JV shareholdings, underpinning funding for low-capex upstream assets in Quebec and Ghana.
  • Robust project pipeline: Projects include the now-producing NAL, the licensed Awoyah DMS project in Ghana (production by 2025–26), and U.S. lithium hydroxide conversion plants in Tennessee and North Carolina to tap rising EV demand and IRA incentives.
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Earnings Conference Call
Piedmont Lithium Q3 2023
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