RESEARCH: Piedmont Lithium – New Equity Infusion

FYI | Jun 23 2020

Pitt Street Research sees growth optionality stemming from Piedmont Lithium's chemical plant

By Pitt Street Research

Piedmont Lithium ((PLL)) is a hard rock lithium play that owns 100% of the integrated project in North Carolina, USA.

Recently, PLL released a pre-feasibility study (PFS) on its chemical plant, a specialty chemical facility that would convert spodumene concentrate (SC6.0) into battery-grade lithium hydroxide (LiOH) for use in the electric vehicles.

PLL Receives New Equity Funding

In June 2020, PLL announced an equity raising of $29M to support the development of its integrated project.

To date, PLL has completed its US public offering component and raised gross proceeds of $18.6M. PLL’s contemporaneous Australian private placement is fully-allocated to raise another $10.8M, with closing expected in late July 2020 after a shareholder vote.

The combined proceeds are planned to be spent on ongoing project development including a Definitive Feasibility Study, testwork, permitting, ongoing land consolidation and general corporate purposes.

Merchant Model vs Integrated Model

Besides reinforcing the compelling economics of PLL’s integrated project (i.e. mine/concentrator & chemical plant), the PFS highlighted a new investment case for the company’s LiOH chemical plant when viewed as a stand-alone merchant SC6.0 conversion facility.

In contrast to the integrated model where the mine/concentrator will supply the required SC6.0 to the plant for LiOH conversion, this merchant model would instead purchase SC6.0 from the global markets.

Given the chemical plant’s flexibility to externally source SC6.0 and thereby being able to function on its own, it is clear that the merchant model provides optionality to PLL, which we believe should limit the downside risk of the integrated project.

Valuation upgraded to $0.33 – $0.60 per share

We continue to value PLL on a DCF analysis of the integrated model. After re-aligning our assumptions with most of the scoping studies updates and factoring in the de-risking of the integrated project, our valuation range remains largely intact.

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