Why is the Piedmont Lithium share price tumbling today?

A businessman slips and spills his coffee.A businessman slips and spills his coffee.

The Piedmont Lithium Inc (ASX: PLL) share price is taking a steep fall on Friday, down 5.4% in late morning trade.

The ASX lithium stock closed yesterday trading for 84 cents per share. Shares are currently trading for 80 cents apiece.

Indeed, most ASX lithium shares are selling off today (though not as sharply) as investors remain skittish about the short-term outlook for the price of the battery-critical metal.

Here’s what else ASX investors are considering today.

Why is the ASX lithium share under pressure today?

The Piedmont Lithium share price looks to be under extra pressure on Friday following a tough day of trading for its US-listed stock yesterday (overnight Aussie time). Shares closed down 8.0% on the NASDAQ.

This follows an update on the company’s proposed Tennessee Lithium Project, located in the United States.

Piedmont Lithium released the results of its Definitive Feasibility Study (DFS) for the 30,000 tonne per year lithium hydroxide (LiOH) plant. The plant uses waste-reducing Metso:Outotec conversion technology.

The DFS has affirmed the potential for Piedmont to develop an American-based lithium hydroxide business using spodumene concentrate from market sources. Piedmont already has existing offtake agreements with Sayona Quebec and Atlantic Lithium.

Piedmont is estimating an after-tax net present value (NPV at an 8% discount rate) of US$2.5 billion and an after-tax internal rate of return (IRR) of 32%. The DFS assumed fixed prices of US$26,000 per tonne of lithium hydroxide and US$1,600 per tonne of spodumene concentrate over the project’s expected 30-year lifecycle.

Development of the project remains subject to the receipt of material permits and the arrangement of project financing. Perhaps it’s that yet to be arranged financing that’s adding some extra pressure to the Piedmont Lithium share price today, as a sizeable capital raise could dilute share value.

What did management say?

Commenting on the DFS results, Piedmont CEO Keith Phillips said:

America’s pro-EV and battery manufacturing policies are providing an advantage to Piedmont at a time when many analysts are projecting lithium shortages to continue into the 2030s…

Tennessee Lithium is positioned to be a key resource for EV and battery manufacturers. Through long-term supply agreements with our partners, we can source raw material from spodumene that we own or in which we have an economic interest, providing greater control of our feedstock while capturing the economics of integrated production.

Addressing the required capital needs, Phillips added, “We can advance development of the operation with revenues anticipated from the restart of North American Lithium and our recent offtake agreements with Tesla and LG Chem.”

Permitting and project financing activities at the Tennessee Lithium Project are advancing. Piedmont aims to commence construction in 2024.

Piedmont Lithium share price snapshot

As you can see in the chart below, the Piedmont Lithium share price has had a strong run in 2023 after tumbling from its recent November highs.

Despite today’s retrace, the ASX lithium share has gained 22% year to date.

The post Why is the Piedmont Lithium share price tumbling today? appeared first on The Motley Fool Australia.

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More reading

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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