Q3 2024 Piedmont Lithium Inc Earnings Call

Kayla: Thank you for standing by. My name is Kayla and I will be your conference operator today. At this time, I'd like to welcome everyone to the Q3 2024 Piedmont Lithium Earnings Call. All lines have been placed on mute to prevent any background noise.

Kayla: After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you'd like to withdraw your question, again press the star and 1.

Speaker Change: I will now turn the call over to Aaron Sanders, Senior Vice President of Corporate Communications and Investor Relations.

Aaron Sanders: Thank you, operator, and good morning, everyone. Welcome to Piedmont Lithium's third quarter 2024 earnings call.

Aaron Sanders: Joining us today from Piedmont-Lytham are Keith Phillips, President and Chief Executive Officer, who will provide the introduction and corporate and operational updates. Michael White, Chief Financial Officer, will then review our financial results.

Aaron Sanders: will 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.

Aaron Sanders: 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.

Aaron Sanders: 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.

Aaron Sanders: Any reference in our discussion today to Evada means adjusted Evada. Further references to shipments are shipments of spodumene concentrate and tons are dry metric tons.

Speaker Change: 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 Phillips: Thanks, Erin, and thanks, everybody, for joining us today for Piedmont Lithium's third quarter 2024 earnings call.

Keith Phillips: We're going to jump right in today to discuss what has been a successful quarter for us. Challenging, but successful.

Keith Phillips: If you've been on our first two calls this year, you've heard our theme of a year of two halves.

Keith Phillips: describing the expected market difference between our first half and second half shipping volumes, capital and investment spending, and commercial strategies. And we're happy to report that we met or exceeded our goals in Q3.

Keith Phillips: So the key points we'll discuss on this call are, number one, our refined commercial strategy.

Keith Phillips: We were able to execute a record quarter of customer deliveries while also improving profitability per ton during the quarter Our ability to hedge against the futures market resulted in a realized price that was comparatively one of the best in the industry

Keith Phillips: Part of the strategy we executed was the important move to consolidate and co-mingle shipments to reduce transportation costs.

Keith Phillips: Number two, North American Lithium once again achieved quarterly production records as well as reduced unit operating costs, supporting our successful quarter of deliveries to customers.

Keith Phillips: Lastly, we improved our cash position with a heavy focus on discipline spending across OpEx, CapEx, and investments in affiliates.

Keith Phillips: Now let's move to slide 4 for a quick project update.

Keith Phillips: North American Lithium is already the largest lithium operation in North America. Again, this quarter we set new production records and reduced operating costs during the third quarter. I'll talk more about NAL production on the next slide.

Keith Phillips: Cyana also increased the mineral resource estimate including a significant increase in the mineral resources in the measured and indicated categories in accordance with JORC code requirements.

Keith Phillips: With the updated MRE, completion of major capital projects, and operations at steady state, the joint venture is well positioned to consider potential brownfield expansions to this asset.

Keith Phillips: Turning to our joint venture project in Ghana, AWOIA. AWOIA received a TTA permit during quarter three and the mine operating permit in October. These were major regulatory milestones.

Keith Phillips: Meanwhile, the next major requirement in the development timeline is parliamentary ratification of the mining lease. We expect this ratification will occur in the first half of 2025, but the project timeline is also subject to prevailing market conditions.

Keith Phillips: As we noted in our last call, we have engaged a financial advisor to secure funding for our share of AWOIA CapEx. There is broad interest from potential parties. However, we are taking our time with this process given current market conditions.

Speaker Change: At Carolina Lithium, we recently received some very positive news in the form of the final guidance provided by the U.S. Treasury Department regarding the Inflation Reduction Act's 45X tax credit.

Speaker Change: The new guidance supports the application of the 10% manufacturing credit to direct and indirect material costs.

Speaker Change: We're very pleased with this decision. We should materially improve the after-tax economics of U.S. projects like Carolina Lithium.

Speaker Change: With regard to funding, we continue to engage in discussions with potential strategic partners and to evaluate broader funding strategies.

Speaker Change: To that point, I'd like to take a moment to clarify the status of our ATVM loan applications where there seems to be some confusion in the market.

Speaker Change: The Department of Energy's ATVM loan program offers the potential for long-term, low-cost financing for projects like Carolina Lithium. Certain of our peers have received sizable ATVM commitments, and we think Carolina Lithium is ideally suited to capitalize on the program.

Speaker Change: We have been in discussions with the DOE for several years and had previously submitted ATVM loan applications for both Carolina Lithium and Tennessee Lithium.

Speaker Change: As we disclosed in our 10K in February, those applications were both withdrawn in 2023 as we began to re-evaluate development priorities and schedules.

Speaker Change: We are once again in the pre-application process in consultation with the DOE Loan Programs Office and will submit a fresh ATVM application at a future date.

Speaker Change: Our current focus, however, is ongoing work related to advancing permitting, specifically the air and water permits.

Speaker Change: as we take a measured approach to further approvals and the phased development during the current market downturn. Carolina Lithium is a highly strategic project and important to America's energy national security, but a project of this scale will require stronger lithium markets to underpin the best funding profile.

Speaker Change: On slide 5, we dive a little more deeply into NAL's operating progress this past quarter. We're very pleased that the project has continued to improve quarterly production volume with more than 52,000 dry metric tons of spodumene concentrate produced in Q3, a 5% increase quarter over quarter.

Speaker Change: Mill utilization also increased to a record 91 percent, a nice gain from the previous quarter, driven largely by the availability of the crust ore dome, which was commissioned in Q2. Recoveries held steady at 67 percent.

Speaker Change: In parallel, cost per ton decreased 11% quarter over quarter, or 15% if you exclude the impact of inventory adjustments. We're excited to see that trend.

Speaker Change: Last but certainly not least, NAL achieves an incident-free safety record in September with no lost time injuries, no modified duty injuries, and no medical aid injuries.

Speaker Change: You can also see on this slide CYANA's fiscal year 2025 guidance regarding production sales and operations, all of which look excellent.

Speaker Change: Now we'll turn it over to Michael who will provide a detailed discussion on our Q3 financial performance.

Speaker Change: Michael. Thanks Keith. Good morning everyone. Turning to slide 7, I will outline our third quarter results.

Speaker Change: We shipped approximately 31,500 dry metric tons for the quarter, which is more than twice our volume shipped in the previous quarter.

Speaker Change: and recognized $27.7 million in revenue compared to $13.2 million in the previous quarter and $47.1 million in the prior year quarter. Revenue doubled from the previous quarter due to increased volume and declined from the prior year quarter due to lower lithium pricing.

Speaker Change: Our realized price per metric ton was $878.00 for the quarter. On an SC6 equivalent basis, our realized price per metric ton equated to $976.00. We are pleased to achieve these price realizations, especially given market conditions.

Speaker Change: Keith will talk about our successful commercial strategy in more detail in a few moments.

Speaker Change: Third quarter gap net loss was $16.7 million or 86 cents per share.

Speaker Change: and adjusted net loss was $8.1 million or $0.42 on an adjusted per share basis. Included in our GAAP results were $4.6 million in restructuring and impairment charges associated with our 2024 cost savings plan.

Speaker Change: of which $4.1 million related to impairment for Tennessee lithium as we shifted our planned lithium hydroxide capacity to Carolina lithium and $500,000 related mainly to employee severance and benefit costs.

Speaker Change: Also included in our gap results were realized and unrealized gains on equity security holdings and other transaction costs.

Speaker Change: We ended the quarter with $64.4 million in cash compared to $59 million in cash at the end of the second quarter. Let's move to slide 8 for sources and uses of cash.

Speaker Change: Borrowings are credit against the outstanding balance at the time vessels complete loading, which provides additional borrowing availability. Interest is payable quarterly at the rate of SOFR plus 2.4 percent.

Speaker Change: This multi-year credit facility resulted in improved liquidity as net proceeds from the credit facility were $18 million during the quarter, which supported our increased cash position compared to the end of the previous quarter.

Speaker Change: We're pleased to report that cash outflows for investments in and advances to affiliates were only $2 million this quarter, as we succeeded in outperforming our previous guidance of $5 to $7 million.

Speaker Change: Investments in Sciona Quebec has significantly reduced since completion of the crushed ore dome in mid-2024 and we have benefited from improved efficiencies at NAL which have lowered NAL's operating cost structure.

Speaker Change: Further, we expect minimal spending at AWOIA as the focus remains on permitting and finalizing feed.

Speaker Change: Our capital expenditures of $2 million in the quarter were right on target.

Speaker Change: Let's move to slide 9 to review our 2024 Cost Savings Plan. It continues to be critical that we appropriately manage our costs during the down cycle. And while we do not know how long the down cycle will last, we are committed to taking action to right-sizing our cost structure in a thoughtful yet agile manner.

Speaker Change: We achieved $14 million in annual cash cost savings as part of our 2024 cost savings plan. This is above our $10 million target set at the beginning of the year.

Speaker Change: We expect to recognize the majority of the savings in 2024 within operating expenses and capital expenditures. This includes actions taken during the fourth quarter to further reduce our workforce by 32%, bringing our total workforce reduction in 2024 to 48%.

Speaker Change: We recorded $6.7 million in restructuring and impairment charges through September 2024. This includes $2.1 million in cash charges mainly related to employee severance and benefit costs and exit costs.

Speaker Change: and $4.6 million in non-cash charges primarily related to impairment at Tennessee Lithium.

Speaker Change: We expect to incur approximately $1 million in employee severance and benefits costs in the fourth quarter as a result of our most recent workforce reduction.

Speaker Change: As part of our 2024 cost savings plan, we are continuing to take a measured approach to joint venture spending and capital expenditures during the down cycle. We've made significant progress in these areas, which we will review as part of our outlook.

Speaker Change: So let's move forward to slide 10 to review our fourth quarter and full year expectations.

Speaker Change: We have adjusted our full-year outlook for shipments in 2024 from approximately 126,000 dry metric tons to a range of 102,000 to 116,000 dry metric tons due to a customer request.

Speaker Change: which shifts one planned Q4 shipment into the first quarter of 2025 and potentially a second shipment from December to January 2025 to allow for our shipment to be combined with a Siona, Quebec shipment, therefore reducing transportation costs.

Speaker Change: Our adjusted fourth quarter outlook for shipments is 41,000 to 55,000 dry metric tons.

Speaker Change: It's important to note any tons not shipped in the fourth quarter will be accretive to our 2025 offtake, which is the higher of 113,000 tons or 50% of production at NAL.

Speaker Change: This guidance aligns with the production outlook and customer allocations of tons from our joint venture at North American Lithium.

Speaker Change: Of course, certain factors, including shipping constraints and customer requirements, may impact the timing of future shipments.

Speaker Change: The key takeaway in our CapEx and Investments Outlook is that project-related expenditures are greatly reduced compared to both the first half of 2024 as well as full year 2023.

Speaker Change: We expect less than $1 million in capital expenditures in the fourth quarter. On a full-year basis, CapEx is expected to be $11 to $12 million. This is heavily reduced compared to CapEx of $57 million in 2023.

Speaker Change: We expect joint venture investments and advances to be approximately $2 million to $4 million in the fourth quarter and $27 million to $29 million for full year 2024.

Keith Phillips: This compares to $43 million in 2023. As always, our outlook is subject to changes in market conditions. And with that, I'll turn the presentation back over to Keith.

Keith Phillips: Thank you, Michael. I'd like to share some thoughts about pricing and the market, starting with a look at realized prices.

Keith Phillips: Since our call today is at the tail end of the Zerning cycle, we have the benefit of being able to compare this quarter's reported realized pricing across the industry on an SC6 equivalent basis.

Keith Phillips: Our second half commercial strategy took advantage of lithium futures markets being in contango to improve our price realizations to an average of $976 a ton, again on an SC6 equivalent basis, which as you can see from this slide, was an industry-leading price for the quarter.

Keith Phillips: Improved profitability was also the result of our consolidation of shipments with the JV Sciona Quebec, which reduced transportation costs significantly. As Michael noted, we continue to leverage opportunities to streamline the shipping schedule to generate further cost savings.

Keith Phillips: The futures market remains in contango, and we will continue to evaluate opportunities to work with our trading company partners to lock in higher prices on specific future shipments, all while working to minimize trade costs by co-mingling shipments where possible.

Keith Phillips: As for the lithium market we're focused on three key trends. First, supply cuts and project delays across the market. As you can see on slide 13, curtailment and delays are coming from major producers and next-gen producers.

Keith Phillips: Lithium prices just aren't at a level to support much greenfield development, and I expect that will ultimately lead to lithium shortages in the medium term.

Keith Phillips: Second, demand growth. The EV market continues to experience record sales. Full stop. There have been seven consecutive months through September 2024 with more than 1 million EVs.

Keith Phillips: sold. Sales are up over 23% year over year through September and for two consecutive months, August and September, China alone has sold more than a million EVs.

Keith Phillips: Beyond EVs, ESS battery production is also a growing market with production up 46% year-over-year and strengthening.

Keith Phillips: Lithium demand is growing and we see evidence of the growth in recent pricing reported by fast markets with spodumene concentrate prices up $100 from the trough in September, September 10th to be exact and up $70 in just the past 11 days.

Keith Phillips: The third trend we see is consolidation, M&A, counter-cyclical investments, and the importance of diversification into lithium geographically and access into end markets. That's a very good thing for shareholders in the lithium business.

Keith Phillips: We believe these market trends, cuts in supply, demand growth, and consolidation all point in the right direction. We are looking forward to the coming year. With that, I'll turn the call back over to the operator so we can open up for Q&A.

Speaker Change: And at this time I'd like to remind everyone in order to ask a question press the star and the number one on your telephone keypad. Our first question comes from the line of Joseph Rager with Roth Capital Partners. Your line is open.

Hey Keith and team, thanks for taking the questions.

Speaker Change: I guess first thing on this potential shipment that could be shifted the second one to Q1

Keith Phillips: Do you guys have insight on which way that's leaning right now or is it kind of on the fence?

Speaker Change: Thanks Joe. I'd say it's on the fence but leaning toward a deferral to January. The transport cost savings are pretty significant.

Speaker Change: We would, you know, we currently have a shipment scheduled in December, the joint venture has one scheduled in January. By commingling the shipments we would save probably a million three or four US dollars.

in transport costs. So it's very significant.

Speaker Change: jointly we would save that. So from our perspective it almost certainly makes sense to save that cash. That's something that'll be resolved over the coming days.

Okay, second thing, you mentioned M&A.

Speaker Change: Given the current market and some of the, let's call them pre-revenue companies struggling, are there opportunities that you guys are seeing out there for you guys to do M&A, or is that just something you wanted to highlight as industry related?

Speaker Change: Now I just wanted to highlight it as an industry theme. I think it's a trend we've seen this in other commodities over time. This is a

Speaker Change: You know, it's a really fast growing business, we're probably in the second or third inning of the lithium.

Speaker Change: boom over the next few decades, I think, and as you've got just a large number of companies, and at the end of the day, I think there'll be consolidation as a general matter. I think that consolidation will be good for the industry and good for investors, and just something I think is a theme people should be aware of and thinking about.

Speaker Change: Okay, thanks. Well, congrats on a good quarter and I'll turn it over.

Thank you, Joe.

Speaker Change: And your next question comes from the line of David Dekelbaum with T.D. Cohen. Your line is open.

Speaker Change: Thanks for taking my questions, Keith, and for the details this morning.

Speaker Change: I was hoping that you could dig in a little bit just on the outlook over the next few years. I think you clarified the ATVM loan process and highlighted the benefits of 45X at Carolina that improves the economics there.

Speaker Change: Could you sort of set like a view or a target or goal, you know, for how you'd like to progress with that project over the next year or two? It would seem that perhaps you would be looking for off-take partners first or some sort of strategic partner there and then going through a loan process for perhaps an FID at the end of the decade?

Speaker Change: Yeah, David, that's a great question. Ultimately, a lot of it is, you know, based on the market and when the recovery happens, we're highly confident the recovery is coming. We don't have, you know, great confidence in the timing of it, but I think fundamentally with so many projects being deferred and many probably deferred, you know, permanently, projects that I would characterize as marginal, not our projects but some other projects,

Speaker Change: I think at some point there's just going to be not enough lithium to meet the demand that continues to grow. So projects like Carolina are going to be needed.

Speaker Change: I think you're right. Our number one priority at Carolina right now, you know, we've done an immense amount of work on engineering, the project's very advanced. DFS obviously was completed a long time ago, but we've invested a lot of money since then in more detailed engineering.

Speaker Change: And we've given a lot of thought to different financial structures. At the end of the day, the best way to advance the project we think is with a partner. And not just an offtake partner, but really a partner who could bring, there's really three things a partner could bring. They could be an offtaker, which is really sort of the easy part. Everybody wants U.S. lithium.

finding customers isn't that challenging.

Speaker Change: They can bring capital, which limits the group a little bit, and ideally they could bring operating capability. So we think of Carolina as an integrated project. The spodumene mining and concentrate operation is relatively straightforward to execute.

Speaker Change: We've seen, with other larger companies, struggles to execute on the downstream hydroxide front. So, whether or not we think we can build a team to do that on our own...

Speaker Change: That's a less credible strategy today in the market than it was a few years ago, just given the struggles of Albemarle in Western Australia, Tang Shih in Western Australia.

Speaker Change: and others. So we're in conversations with people, and these conversations have been going on for some time, but the ideal partner, in my mind, is somebody who brings capital, who brings expertise.

Speaker Change: That limits the group further, and of course that's a party that would probably want their share of the offtake.

Speaker Change: That's priority one. That's where a party can bring capital in early to help do more work on the rezoning front and on the detailed engineering front and really help execute this project and bring it forth through the ATVM loan process and everything else.

Speaker Change: We're here to ward the tail end of 2024. I would certainly hope we could get to FID well before the end of the decade, but it's hard to put a detailed timeline on it.

I appreciate that Keith.

Speaker Change: Perhaps as we go into next year, and you guys have rationalized the budget for 2024 considerably, it seems like there are some catalysts ahead in the first half of 2025 as it relates to the OOIA, and you guys are looking at some.

Speaker Change: financing strategies there as well, but it would seem holistically that the capital requirements for Piedmont at the corporate level are quite minimal in 25. Is that a fair assessment?

Speaker Change: Yeah, I mean, you used the word capital, but I think from a burn rate perspective, our burn rate, given the significant overhead and staffing reductions and other cost reductions Michael has indicated, our burn rate has declined significantly.

Speaker Change: Capital is all about, you know, when you deploy it and if the market remains, you know, muted like this, then I think AWOIA, unfortunately, will be, will kind of wait for a better market as well. I think that's a view Atlantic shares quite clearly at this stage as well. So, in that case, capital requirements would be quite, would be quite modest.

Speaker Change: One thing I'd mention at AWOIA, you know, we've independently been...

Speaker Change: looking at our financing options for our share of capital. Atlantic has been doing the same. I think there's been some good conversation between the two parties that really the best way to fund that project is probably to work on the funding together.

Speaker Change: and to bring a debt package together at the kind of the operating company level.

Speaker Change: It could be underwritten by someone like the DFC in Washington or someone else. So those discussions are kind of advancing internally and I think in an ideal world we'll bring.

Speaker Change: a really strong financing package into the project so that the capital and equity requirements of each of the partners are minimized significantly. That's something we'll be working on over the course of 2025.

Thanks for the details guys

Thanks, David.

Speaker Change: And your next question comes in a line of Tyler DiMatteo with BTIG. Your line is open.

Speaker Change: Yeah, hi guys, and good morning. Thanks for taking the questions.

Speaker Change: Keith, I wanted to follow up on the the ideal partner comments there you kind of laid out the the three things

Speaker Change: that you could be looking for. I'm curious though, in terms of the in-house versus external for the conversion aspect of things, I guess how quickly does the decision like that?

Speaker Change: need to be made, and then what does the integration look like if you're going to work with a partner, you know, in particular, to your comments surrounding some of the challenges related to conversion in particular?

Speaker Change: Yeah, listen, there are there's a there's a group of companies who have demonstrated expertise in lithium chemical production

Speaker Change: A number of those are Chinese for a variety of reasons, not viable partners, obviously, but there are a number that are not Chinese, and we know them all, and we've had discussions ongoing with each of them. Everybody, as you might imagine, I mean, Carolina Lithium is a bit of a unicorn. It's one of two significant sponsoring ore bodies in the U.S., Kings Mountain Albemarle's project being the other.

Speaker Change: So if you if you're a major player in the business and the battery supply chain somewhere and you want And you're interested in sponge mean as a feedstock given its kind of low risk characteristics

Speaker Change: And you think being in the U.S. is a good idea, which just about everybody does.

pretty high on the list, so.

Speaker Change: So we've had good conversations with a lot of people. I think it'd be pretty easy to bring a partner in, and there's interest. You're juggling a lot of things in terms of, you know, are you bringing in a 50-50 joint venture partner? Who's going to be the operator at the one extreme? Are you bringing in...

Speaker Change: somebody who's more of a 20% partner really bringing more capital.

Speaker Change: how do they think about value at the trough versus how might they have thought about value two years ago or a year from now. So these are things you've had to balance. And from our perspective, Caroline Lithium, you know, that spodumene isn't going anywhere. It's a massively valuable project from an intrinsic value perspective. It's really important for us to protect.

Speaker Change: shareholder value on that project and not do a bad partnering deal. So interest is strong. We'll continue the conversations. I think integrating

Speaker Change: You know, a partner in the project will be pretty straightforward, and of course, when you bring in a partner who has capability and capital, they're going to have a point of view on certain things, and they're going to want to take a fresh look at.

Speaker Change: a variety of things in our engineering plans and that's healthy and that's something that to some extent has been going on already so that's good. We do, I think as we've messaged before, we do continue to tweak things like

Speaker Change: You know, is the right size of a chemical plant, 30,000 tons or 25,000 tons with the mezzo-autotech process.

Speaker Change: The original 30,000 ton plan contemplated two 15,000 ton autoclaves. Our team has, after doing a lot of work subsequent to the DFS, decided it's probably a lot more capital efficient to have one 25,000 ton autoclave.

Speaker Change: and have a 25,000 ton plant. You can't build a 30, there aren't 30,000 ton autoclaves available. So details like that are important, should have positive impact on economics, but those things will all be worked out in due course.

Right, OK, great, and then just.

in terms of the utilization and recovery rates.

Speaker Change: and you've seen a nice ramp at NAL. I'm curious where you see opportunity today to maybe even improve that further or are we kind of at the peak here? Maybe just how do you kind of think about balancing that versus to some of your comments surrounding customer requirements and maybe some of that can be a little bit lumpy. Just curious how you kind of see that opportunity set for just maintaining the asset there.

Speaker Change: Yeah, no, good question. Listen, the team on the ground at NAL is outstanding. They're just doing a fantastic job. I think the mill plant, the mill in particular is working

Speaker Change: kind of at a run rate level. We're still working through some of the challenges in the pit where, you know, we're mining on top of old underground workings from 60, 70 years ago. So mining costs are elevated still. They will be for another year or so probably.

Speaker Change: There's an opportunity to bring the mining component of the cost down probably 15 or 20 percent once we're through that in 2026 so that's out there in the future a little bit

Speaker Change: And then the real opportunity at NAL, and this is important and we haven't talked about it a lot, but

Speaker Change: The mineral resource estimate increased significantly this quarter. Drilling is still ongoing at NAL. This is money that flowed through funding, drilling funding that Cyana had raised. So they're funding that work. It'll be done by the end of the year. I think you'll probably see another resource and reserve update in 2025.

Speaker Change: And then you're going to be looking at a project with...

Speaker Change: You know decades of mine life and the obvious question is is the right thing to have a 40 or 50 year mine life or Is the right thing to double production and and and maximize cash flow that way so

Speaker Change: Early days kicking that around, but I think the brownfield expansion opportunity there is really exciting and It should be you know the brownfield expansion of say doubling production

Speaker Change: would be probably the lowest capped expert on project in Quebec. It's in by far the best location in Quebec. You'd see real benefits from kind of shared infrastructure on site relative to kind of a separate stand-alone Greenfield project.

Speaker Change: So that gets to be very exciting, but that's next-generation stuff, but it certainly could, it certainly...

Speaker Change: As you think about our timeline for development with AWOIA in the relatively near term, Carolina could come in the medium term, brownfield expansion at NAL could kind of fit in there very nicely. So that's something we are beginning to touch a say on it about.

Speaker Change: Great. Thanks for the call, Keith. Appreciate the time this morning. Thanks, Tyler.

Speaker Change: And your next question comes from the line of Gregg Jones with BMO Capital Markets. Your line is open.

Speaker Change: Hi, good morning Keith and team. First question I had was related to shipment timing. Understand the commentary around what might transpire into Q1 next year, but how should we think about timing of remaining shipments in 2025? You've got obviously the baseline of 113,000 tonnes or 50%, maybe 20,000 tonnes rolling into Q1.

Speaker Change: Do you expect the subsequent quarters to be relatively consistent or more aligned with how shipments transpired this year?

Speaker Change: Yeah, Greg, you know, it's a great question and we have some information on that. We haven't shared kind of guidance. I think when we share guidance on February 2025, kind of at the end of Q1 or February, March, whenever we do that, I think, you know, we'll do the best we can to provide.

Speaker Change: some quarterly sequencing, but it's just lumpy for a variety of reasons. I mean, every now and then we have a customer, a contract customer who says, really, I don't really need the material this month. Can I get it in June or whatever? And, and we have those conversations and they generally protect us on price, so we're not disadvantaged.

Speaker Change: and that ends up becoming a spot shipment. So there's things like that that happen. And then increasingly, just in this low price environment, working with our friends at Cyanada to really.

Speaker Change: minimize transport costs. I mean transport costs are an item that when we started producing 18 months ago, people didn't focus on much. When the Spongebe price is three or four or five thousand,

Speaker Change: $50 or $100 here or there on transport costs, it's kind of a rounding error. In today's market, it's the difference between a positive margin and a negative margin, so every dollar counts. And if you can ship a 25,000 or 30,000 ton shipment versus a 12,000 or 14,000 ton shipment, it's

Speaker Change: 50 or 60 bucks a ton less to do that. So it's something we're focused on, and that's why this other December shipment might push.

I'd like you to push.

Speaker Change: So, unfortunately, revenue I think will be lumpy. I think we do expect, as Michael indicated, to the extent we have 113,000 tons sort of due in 2025, and we defer a couple of 2020 for shipments, then we should have higher shipments in 2025 than the 113,000 tons. I think that's...

Speaker Change: That's understood and it's fair to model. I think Q1 will be pretty heavy based on what we've discussed But Q4 this year, the next quarter, it'll be a record quarter for us It'll be the biggest quarter. It should be the biggest quarter for shipments even with these delays

Speaker Change: and then in terms of the balance of 2025 it's just always a little bit of a balancing act between our desires and need requirements and the joint ventures in being fair to each group in terms of the timeliness and everything else so we'll see how that works out.

This is Michael.

As a follow-up to Keith's comments

Speaker Change: One of the things that we experienced in 2024 was the hockey stick view of shipments, and that was due to the ramp up at NAL. Now that we are moving out of that ramp up, and we're going to have a full year of production, as well as the tons that are going to be accretive from Q4 into Q1 of next year.

Speaker Change: Even though, as Keith mentioned, it's going to be lumpy, we're not looking at quite that hockey stick that we had forecasted and experienced in 2024. So while lumpy, it'll still be a little bit more balanced than what you saw this year.

Speaker Change: Thank you. Just a question on the cost side. So in the release this morning, it mentions that operating costs at NAL were about $729 a ton X inventory movements.

Speaker Change: and Saona had disclosed costs around $8.94 in its release a few weeks ago. How should we think about the true cash costs at the operations and how the inventory adjustments are blended into those two numbers?

Speaker Change: Yeah Greg, I'll take a first crack at it. Listen, I think, I think Cyana had a couple disclosures. They do disclose the kind of gap number.

Speaker Change: kind of working its way through the process until you kind of get to a run rate. And we're sort of at run rate in the middle, but that material will continue to run through for a little while. They did, you know, volunteer that Australian dollar, $10.89 or whatever the number was.

Speaker Change: Cash Cost X Inventory, they've quoted that, it's been quoted in some research reports over in Australia.

Speaker Change: So, that's the real, we think, true operating cash cost number now, which is, you know, we hope to do better, but it's significantly lower than prior quarters, and I think it and that still embeds relatively high mining costs.

Speaker Change: which should see some improvement there so so we're feeling good about it I mean it's it's a

Speaker Change: you know it's it's it's approaching kind of the DFS levels and I think you should sort of from a cash-cut perspective if you're just modeling cash I think it's as good a starting point as any going forward.

Okay, thank you. Thank you.

Speaker Change: And your next question comes from the line of Bill Peterson with J.P. Morgan. Your line is open.

Speaker Change: Good morning, Keith and team. This is Bennett on for Bill.

Speaker Change: Looking beyond Q4, could you remind us your expectations in regards to kind of the share of SPA first long-term contract shipments and in 3Q, how much did this contribute to relative pricing strength relative to the comment on hedging?

Keith, do you want me to take that?

Yeah, sure.

Speaker Change: All right, thanks for the question. So from a spot versus long-term customer contract perspective,

Speaker Change: We normally do not break out the shipments between each, but in Q3, we did have spot shipments, and on those shipments, we're able to take positions with our trading partner.

Speaker Change: as well as on other future shipments and take the benefit of hedging, which our partner takes. We do not enter into contracts for hedging, but we're able to take advantage of the Contango through a fixed price arrangement. And so we've been seeing the benefit of that.

Speaker Change: As we go into 2025, we are going to see primarily shipments to our long-term customer contracts.

But having that strong trading partner gives us the flexibility

Speaker Change: That if we do need to pivot because potentially a customer name may need to shift

Speaker Change: a delivery into a future quarter, but yet we are ready to take that offtake and make a sale that we can shift to a spot if we need to. But as we look into 2025, we're looking primarily at long-term customer contract sales.

Speaker Change: All right, thanks for that color. And then if I could on Carolina, do you see any barriers to gaining the necessary air and water permits? What has the feedback been with agencies so far? And I guess what are your rough expectations around timing for these?

Speaker Change: No, I think those, you know, those are in progress. It's been, it's taken longer on the air and water side than we expected, but I think it's going well. I think our expectation is first half.

Speaker Change: first half 2025. We obviously still need to go through the rezoning process, the local rezoning process, which is critical. We're currently thinking we're going to begin that once we have

Speaker Change: you know once we have the other permits behind us and ideally once we have a partner in place which I think would be kind of additive that whole process as well as through the ATV on loan process so 2025 I think will be a year where we we really try to bring all that together and to move forward from there

Great. Thank you for the color and best of luck.

Thanks, Greg.

Speaker Change: And as a reminder, if you would like to ask a question, please press the star and 1 on your telephone keypad. Our next question comes from the line of Matthew Key with B. Riley Securities. Your line is open.

Speaker Change: and Matthew. Your line may be muted on your side if you would like to check. Your line is open.

Speaker Change: Thanks for taking my question, Keith and team. You mentioned that you engaged with some financial advisors to fund the Ghana CapEx. Just at a high level, what financing package do you think makes the most sense in the current market? And also, what do you expect the timing of that to be, given that we're in a depressed pricing environment for Spodumene? I imagine you guys are in a huge rush to develop that asset, kind of in the current market.

Speaker Change: Yeah, no, good question, Matt. Yeah, we do have the advisor retained. They're doing a great job. We've had broad outreach. The focus has been on offtake financing, so.

Speaker Change: That's a project that will produce 180,000 tons a year for our account. 360,000 tons a year of spodumene concentrate, so it's a big project. We get half the material. That material has great value to a lot of customers, car companies, battery companies, users, you know, conversion plants, etc.

Speaker Change: and many of those customers are happy to provide project funding, essentially.

Speaker Change: in order to secure that offtake. So that's the real conversation we've been having and it's been going well. At the same time, given markets, the project's just going to move more slowly, so there's less urgency to put that in place. As offtake partners think about offtake funding, they're really trying to lock in

specific deliveries, so.

Speaker Change: When we started these discussions several months ago, the idea of production in 2026 or 7 was something they could line up. We're now probably later than that. So that complicates the process a little bit, which is fine. Atlantic, as you may know, has announced they have their own very similar process going on. They've been talking to similar people.

Speaker Change: and there's a lot of interest. I think what we've both decided jointly is really if we're going to take more time to develop the project anyway as we wait for the market to recover.

Speaker Change: The best thing to do, you know, because these off take financing, it's effectively debt. People are loaning us money to build something. We pay it back through shipping the material over time.

Speaker Change: The best form of debt, the lowest cost form of debt would be something at the project level where someone could secure the asset. Ideal form of debt might be something with a U.S. government flag over it, like Development Finance Corp financing, which

Speaker Change: and others have used in Africa. We have had conversations with that group. The project is sort of a poster child. You know, it's a clean energy project in a friendly developing country like Ghana. It's sort of perfect. And you can see the project funded 65 plus or minus percent.

Speaker Change: through a loan like that, which could be really accretive to both of us, we could still then do some offtake funding.

Speaker Change: on our own balance sheet and really minimize our equity spend on that project quite dramatically. The other thing I'd say is we're waiting on parliamentary ratification of our mining lease in Ghana. There's an election there this year as well, it's in December.

Speaker Change: That's delayed that process, but we expect to get the ratification in the first half.

Speaker Change: And that ratification is the trigger for a $28 million investment by the Sovereign Wealth Fund in Ghana, which would be, you know, welcome money that would come into the project, they'd be buying a 6% stake, and that would be money available to fund capital on an interim basis and part of the capital beyond that.

and that's something to look forward to as well.

Speaker Change: Is there a specific spodumene price or certain market conditions that you'd want to see prior to developing that project or is it mostly just kind of like a lot of considerations there? But is there a specific price that you think you'd want to have confidence in long term that you'd be comfortable going forward with?

Speaker Change: Yeah, it's a good question, Matt. We've kicked around some numbers. It's not...

Speaker Change: You know, bottom line is you want to be able to generate a positive return on investment and It's hard to find a spodumene project anywhere in the world where you could generate a positive return on investment at seven or eight Hundred dollars, you know Greenfield project seven or eight hundred dollars spodumene

Price, so

Speaker Change: So the price I think needs to be meaningfully higher. I think that it I personally think that inevitably will happen given continued demand growth and increasing pressure on supply. So the time will come and I don't think it's necessarily that far away but there's no there's no bright line test at this stage.

Keith Phillips: Got it. Thanks, Keith. Great job in the corridor. What's good about the Avoya project, just as a highlight is...

Thank you.

Speaker Change: It's a project the capex per ton is relatively low because of its dense medium separation the construction timeline the ramp up could be pretty fast

Speaker Change: So, as you think about the projects that are sort of being deferred, this is one where the execution timeline can be pretty quick.

Speaker Change: you know the best analogy might be the development of Sigma early on which was

Speaker Change: Similar ore body, similar processing, relatively low capex per ton, relatively fast ramp. They've done a great job down there so far, from what I've seen, and that's a good indication for how this project could advance, so we're pretty excited about it.

Keith Phillips: Got it, that's great. Thanks Keith, and good job with the quarter.

Thank you.

Speaker Change: And there are no further questions at this time. I will turn the call back over to Erin Sanders.

Speaker Change: 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.

Demontlithium.com

Thank you.

This concludes today's conference call. You may now disconnect.