The effective tax rate in the three and nine months ended September 30, 2024 and 2023 differs from the U.S. federal statutory rate due to the valuation allowance against our U.S. deferred tax assets and income or loss in foreign jurisdictions that is taxed at different rates than the U.S. statutory tax rate. The decrease in income tax expense for the three and nine months ended September 30, 2024 as compared to the three and nine months ended September 30, 2023 was primarily due to the Australian tax effects of our gain on sale of shares in Sayona Mining in the nine months ended September 30, 2024.
The sale of Sayona Mining shares in the nine months ended September 30, 2024 resulted in a book loss of $17.2 million, primarily due to the previously recorded non-cash gains on dilution of $46.3 million over the life of our investment. The deferred tax on the investment of $6.0 million was reversed for a deferred tax benefit, offset by a $3.2 million tax payable on the total taxable gain of $22.0 million. The tax payable of $3.2 million is recorded in “Other current liabilities” in our consolidated balance sheets.
We apply the equity method to investments when we have the ability to exercise significant influence over the operational decision-making authority and financial policies of the investee.
The following tables summarize the carrying amounts, including changes therein, of our equity method investments:
Three Months Ended September 30, 2024
(in thousands)
Sayona Quebec
Vinland Lithium
Total
Balance at June 30, 2024
$
81,105
$
1,614
$
82,719
Additional investments
—
16
16
Loss from equity method investments
(3,425)
(89)
(3,514)
Foreign currency translation adjustments of equity method investments
909
18
927
Balance at September 30, 2024
$
78,589
$
1,559
$
80,148
Nine Months Ended September 30, 2024
(in thousands)
Sayona Mining(2)
Sayona Quebec
Atlantic Lithium(3)
Vinland Lithium
Total
Balance at December 31, 2023
$
59,494
$
76,552
$
9,825
$
1,791
$
147,662
Additional investments
—
14,961
—
21
14,982
Gain on dilution of equity method investments(1)
—
—
186
—
186
Loss from equity method investments
(2,094)
(11,358)
(198)
(214)
(13,864)
Foreign currency translation adjustments of equity method investments
1,228
(1,566)
856
(39)
479
Net proceeds from sale of shares
(41,413)
—
(7,690)
—
(49,103)
(Loss) gain on sale of shares of equity method investments(4)
(17,215)
—
3,143
—
(14,072)
Transfer to investments in marketable securities
—
—
(6,122)
—
(6,122)
Balance at September 30, 2024
$
—
$
78,589
$
—
$
1,559
$
80,148
__________________________
(1)Gain on dilution of equity method investments relates to the exercise of stock options and share grants which resulted in a reduction of our ownership in Atlantic Lithium and is included in “Gain (loss) on sale of equity method investments” in our consolidated statements of operations.
(2)As of March 31, 2024, Sayona Mining is no longer accounted for as an equity method investment. During the three months ended March 31, 2024, we sold 1,249,806,231 shares of Sayona Mining for an average of $0.03 per share. The shares sold represented our entire holding in Sayona Mining and approximately 12% of Sayona Mining’s outstanding shares and resulted in net proceeds of $41.4 million. The sale of these shares has no impact on our joint venture or offtake rights with Sayona Quebec.
(3)As of March 31, 2024, Atlantic Lithium is no longer accounted for as an equity method investment. During the three months ended March 31, 2024, we sold 24,479,868 shares of Atlantic Lithium for an average $0.32 per share. The shares sold represented approximately 4% of Atlantic Lithium’s outstanding shares and resulted in net proceeds of $7.7 million. In connection with the sale of the shares, we no longer hold a board seat with Atlantic Lithium and therefore do not exercise significant influence. Our remaining investment in Atlantic Lithium of approximately 5% is accounted for as an investment in marketable securities and presented at fair value at each reporting date based on the closing price of Atlantic Lithium’s share price on the ASX. See Note 10—Other Assets and Liabilities. Our reduced ownership in Atlantic Lithium has no impact on our earn-in or offtake rights with Atlantic Lithium and the Ewoyaa project.
(4)Amounts reclassified out of accumulated other comprehensive loss into net income related to the sale of shares of equity method investments were $3.0 million and $0.6 million, net of tax, for Sayona Mining and Atlantic Lithium, respectively.
Foreign currency translation adjustments of equity method investments
(1,394)
(1,618)
(244)
(3,256)
Balance at September 30, 2023
$
55,309
$
68,480
$
9,255
$
133,044
__________________________
(1)Gain on dilution of equity method investments relates to issuances of additional shares of Sayona Mining and Atlantic Lithium, which reduced our ownership interest in both Sayona Mining and Atlantic Lithium and is included in “Gain (loss) on sale of equity method investments” in our consolidated statements of operations.
Nine Months Ended September 30, 2023
(in thousands)
Sayona Mining
Sayona Quebec
Atlantic Lithium
Total
Balance at December 31, 2022
$
44,620
$
39,763
$
11,265
$
95,648
Additional investments
550
28,076
41
28,667
Gain on dilution of equity method investments(1)
15,144
—
64
15,208
(Loss) income from equity method investments
(978)
948
(1,535)
(1,565)
Foreign currency translation adjustments of equity method investments
(4,027)
(307)
(580)
(4,914)
Balance at September 30, 2023
$
55,309
$
68,480
$
9,255
$
133,044
__________________________
(1)Gain on dilution of equity method investments relates to issuances of additional shares of Sayona Mining and Atlantic Lithium, which reduced our ownership interest in both Sayona Mining and Atlantic Lithium and is included in “Gain (loss) on sale of equity method investments” in our consolidated statements of operations.
Our share of (loss) income from equity method investments is recorded on a one-quarter lag in “(Loss) income from equity method investments” within “(Loss) income from operations” in our consolidated statements of operations. At each reporting period, we assess whether there are any indicators of other-than-temporary impairment of our equity investments. No other-than-temporary impairment was recorded for the three and nine months ended September 30, 2024 and 2023.
As of September 30, 2024, our equity method investments consisted of Sayona Quebec and Vinland Lithium.
Sayona Quebec
We own an equity interest of 25% in Sayona Quebec for the purpose of furthering our investment and strategic partnership in Quebec, Canada. The remaining 75% equity interest is held by Sayona Mining. Sayona Quebec holds a 100% interest in NAL, which consists of a surface mine and a concentrator plant, as well as Authier and Tansim.
We hold a life-of-mine offtake agreement with Sayona Quebec for the greater of 113,000 dmt or 50% of spodumene concentrate production per year. Our purchases of spodumene concentrate from Sayona Quebec are subject to market pricing with a price floor of $500 per dmt and a price ceiling of $900 per dmt for 6.0% spodumene concentrate.
In addition to lithium mining and concentrate production, NAL owns a partially completed lithium carbonate plant, which was developed by a prior operator of NAL. Sayona Quebec completed a preliminary technical study for the completion and restart of the NAL carbonate plant during the quarter ended June 30, 2023. If we decide to construct and operate a lithium conversion plant with Sayona Mining through our joint venture, Sayona Quebec, then spodumene concentrate produced from NAL would be preferentially delivered to that conversion plant upon commencement of conversion operations. Any remaining spodumene concentrate not delivered to the conversion plant would first be sold to us up to our offtake right and then to third-parties. Any decision to construct jointly-owned lithium conversion capacity must be agreed upon by both parties.
In the three months ended September 30, 2024, NAL produced approximately 52,100 dmt of spodumene concentrate and shipped approximately 49,000 dmt, of which approximately 31,500 dmt were sold to Piedmont Lithium. We sold approximately 31,500 dmt of spodumene concentrate and recognized $27.7 million in revenue with a realized sales price of $878 per dmt and a realized cost of sales of $794 per dmt, in the three months ended September 30, 2024.
In the nine months ended September 30, 2024, NAL produced approximately 142,200 dmt of spodumene concentrate and shipped approximately 134,700 dmt, of which approximately 61,000 dmt were sold to Piedmont Lithium. We sold approximately 61,000 dmt of spodumene concentrate and recognized $54.3 million in revenue with a realized sales price of $890 per dmt and a realized cost of sales of $825 per dmt, in the nine months ended September 30, 2024.
Realized cost of sales is the average cost of sales based on our offtake pricing agreement with Sayona Quebec for the purchase of spodumene concentrate at a market price subject to a floor of $500 per dmt and a ceiling of $900 per dmt, with adjustments for product grade, freight, and insurance.
We had payables to NAL totaling $0.3 million and $0.2 million as of September 30, 2024 and December 31, 2023, respectively. Payables to NAL are reported as “Payables to affiliates” in our consolidated balance sheets.
Vinland Lithium
We own an equity interest of approximately 20% in Vinland Lithium, a Canadian-based entity jointly owned with Sokoman Minerals and Benton Resources. Vinland Lithium currently owns Killick Lithium, a large exploration property prospective for lithium located in southern Newfoundland, Canada. We have entered into an earn-in agreement with Vinland Lithium to acquire up to a 62.5% equity interest in Killick Lithium through current and future phased investments.
Summarized Financial Information
The following table presents summarized financial information included in our share of (loss) income from equity method investments noted above for our significant equity investment Sayona Quebec. The balances below were compiled from information provided to us by Sayona Quebec and is presented in accordance with U.S. GAAP:
Three Months Ended September 30,
Nine Months Ended September 30,
(in thousands)
2024
2023
2024
2023
Revenue
$
16,524
$
—
$
73,506
$
—
Gross profit (loss)
(12,434)
—
(45,031)
—
Net loss from operations
(13,588)
14,210
(47,702)
3,792
Net loss
(13,700)
14,210
(45,429)
3,792
9.ADVANCES TO AFFILIATES
Advances to affiliates consisted of the following:
(in thousands)
September 30, 2024
December 31, 2023
Ewoyaa
$
36,425
$
26,378
Killick Lithium
2,783
1,811
Total advances to affiliates
$
39,208
$
28,189
Advances to affiliates relate to staged investments for future planned lithium projects. We have a strategic partnership with Atlantic Lithium that includes Atlantic Lithium Ghana’s flagship Ewoyaa project. Under our partnership, we entered into a project agreement to acquire a 50% equity interest in Atlantic Lithium Ghana in two phases, with each phase requiring us to make future staged investments in Ewoyaa over a period of time in order to earn our additional interest. We have an earn-in agreement with Vinland Lithium to acquire up to a 62.5% equity interest in Killick Lithium.
Our maximum exposure to a loss as a result of our involvement in Ewoyaa and Killick Lithium is limited to the total amount funded by Piedmont Lithium to Atlantic Lithium and Vinland Lithium. As of September 30, 2024, we did not own an equity interest in Atlantic Lithium Ghana or Killick Lithium. We have made advances to Atlantic Lithium for Ewoyaa totaling $2.1 million and $2.1 million in the three months ended September 30, 2024 and 2023, respectively, and $10.0 million and $6.9 million in the nine months ended September 30, 2024 and 2023, respectively. We have made advances to Vinland Lithium for Killick Lithium totaling nil and $1.0 million in the three and nine months ended September 30, 2024, respectively.
Ewoyaa
We completed Phase 1 of our investment in mid-2023, which allowed us to acquire a 22.5% equity interest in Atlantic Lithium Ghana, by funding Ewoyaa’s exploration activities and DFS costs and notifying Atlantic Lithium of our intention to proceed with additional funding contemplated under Phase 2, which mainly consists of construction and development activities for Ewoyaa. Atlantic Lithium issued their DFS for Ewoyaa in June 2023. In August 2023, we supplied Atlantic Lithium with notification of our intent to proceed with additional funding for Phase 2. Our future equity interest ownership under Phase 1 remains subject to government approvals. Phase 2 allows us to acquire an additional 27.5% equity interest in Atlantic Lithium Ghana upon completion of funding $70 million for capital costs associated with the development of Ewoyaa. Upon issuance of our equity interest associated with Phase 1 and completion and issuance of our equity interested associated with Phase 2, we expect to have a total equity interest of 50% in Atlantic Lithium Ghana. Atlantic Lithium Ghana, in turn, will hold an 81% interest in the Ewoyaa project net of the interests that will be held by the Ghanaian government and MIIF, resulting in an effective ownership interest of 40.5% in Ewoyaa, by Piedmont Lithium.
Killick Lithium
In October 2023, we entered into an earn-in agreement with Vinland Lithium to acquire up to a 62.5% equity interest in Killick Lithium through current and future phased investments. As part of our investment, we entered into a marketing agreement with Killick Lithium for 100% marketing rights and right of first refusal to purchase 100% of all lithium products produced by Killick Lithium on a life-of-mine basis at competitive commercial rates.
10.OTHER ASSETS AND LIABILITIES
Other current assets consisted of the following:
(in thousands)
September 30, 2024
December 31, 2023
Marketable securities
$
5,627
$
—
Prepaid and other current assets
2,344
3,345
Equity securities
246
484
Total other current assets
$
8,217
$
3,829
Our investments in marketable securities consisted of common shares in Atlantic Lithium, a publicly traded company on the ASX. During the three and nine months ended September 30, 2024, we recognized losses of $2.6 million and $0.8 million, respectively, based on changes to fair value of the marketable securities. Prior to March 31, 2024, we accounted for Atlantic Lithium under the equity method of accounting. See Note 8—Equity Method Investments.
Our investment in equity securities consisted of common shares in Ricca, a private company focused on gold exploration in Africa. We recognized losses of $0.2 million on the equity securities based on changes in observable market data during the nine months ended September 30, 2024, respectively.
We had no changes to fair value of equity securities in the three months ended September 30, 2024 or marketable and equity securities in the three and nine months ended September 30, 2023.
Other non-current assets consisted of the following:
(in thousands)
September 30, 2024
December 31, 2023
Operating lease right-of-use assets
$
1,030
$
1,371
Asset retirement obligation, net
393
414
Other non-current assets
284
379
Total other non-current assets
$
1,707
$
2,164
Asset retirement obligation is net of accumulated amortization of $28 thousand, and $7 thousand as of September 30, 2024 and December 31, 2023, respectively.
Other current liabilities consisted of the following:
(in thousands)
September 30, 2024
December 31, 2023
Current tax payable (Note 7)
$
3,151
$
—
Operating lease liabilities
163
312
Interest payable
61
—
Accrued provisional revenue adjustment
—
29,151
Total other current liabilities
$
3,375
$
29,463
We recognize revenue from product sales at a point in time when performance obligations are satisfied under the terms of contracts with our customers. When the final price has not been resolved by the end of a reporting period, we estimate the expected sales price based on the initial price, market pricing, and known quality measurements. Differences between payments received and the estimated sales price, which resulted in a liability, are recorded as accrued provisional revenue adjustments. We had no outstanding liability for accrued provisional revenue adjustments as of September 30, 2024.
11.DEBT OBLIGATIONS
Our debt obligations consisted of the following:
(in thousands)
Interest Rate
September 30, 2024
December 31, 2023
Credit Facility
SOFR + 2.4%
$
18,007
$
—
Mining interests financed by sellers
9.5% - 13.0%
5,125
163
Insurance premium financing loan
8.2%
923
—
Total debt obligations
24,055
163
Current debt obligations
(19,966)
(149)
Long-term debt, net of current portion
$
4,089
$
14
Mining Interests Financed by Sellers
We have entered into long-term debt agreements to purchase surface properties and the associated mineral rights from landowners that form part of mining interests reported within “Property, plant and mine development, net” in our consolidated balance sheets. These purchases were fully or partly financed by the seller of each of the surface properties. Payment terms range from 2 years to 5 years with the majority of payments due in monthly installments ranging from approximately $4,000 to approximately $30,000. Long-term debt agreements are secured by the respective real property.
Credit Facility
On September 11, 2024, we entered into a working capital facility, whereby we may borrow up to $25.0 million based on the value of committed volumes of spodumene concentrate occurring within the following twelve months. Borrowings, are credited against the outstanding balance at the time the vessel has completed loading. Interest is payable quarterly at the rate of SOFR plus 2.4%. The lender has the right to modify the payment terms of the Credit Facility in the event the Company experiences a material change in
creditworthiness. The Credit Facility expires on December 31, 2027 but may be extended by mutual agreement through December 31, 2028.
We may borrow up to 40% of the value of committed volumes of spodumene concentrate unless we elect to enter into a fixed-price arrangement with the lender that would allow us to increase borrowing up to 75% of the value of future, committed volumes of spodumene concentrate through December 31, 2027. We determined the fixed-price arrangement to be an embedded derivative that must be bifurcated from the Credit Facility. The fair value of the embedded derivative was immaterial as of September 30, 2024. We re-evaluate the fair value of the fixed-price arrangement at the end of each reporting period.
Insurance Premium Financing Loan
On May 23, 2024, we entered into a financing agreement through our insurance broker to spread the payment of our annual directors and officers insurance premium over an nine-month period. Insurance premiums financed totaled $2.1 million and are payable between May 2024 and January 2025 at an interest rate of 8.2%.
Interest Expense
Interest expense and cash paid for interest are reflected in the following table:
Three Months Ended September 30,
Nine Months Ended September 30,
(in thousands)
2024
2023
2024
2023
Interest expense
$
169
$
8
$
467
$
34
Cash paid for interest expense
119
8
406
34
12.EQUITY
We are authorized to issue up to 100,000,000 shares of common stock, par value $0.0001 per share, and 10,000,000 shares of preferred stock, par value $0.0001 per share. We have no outstanding shares of preferred stock.
In May 2024, we entered into an ATM Program with B. Riley Securities, Inc., whereby we may from time to time, at our discretion, issue and sell up to $50 million of our Class A common stock through any method deemed to be an at-the-market offering, as defined in Rule 415 of the Exchange Act, or any method specified in the ATM Program.
We have not issued any shares under the ATM Program through September 30, 2024.
In February 2024, we issued a total of 52,701 shares of our common stock at an issue price of $14.17 per share as an advance of our funding obligations to Killick Lithium. There were no share issuance costs associated with the issuance and the value of the shares were treated as an advance within our earn-in agreement with Vinland Lithium to acquire up to a 62.5% equity interest in Killick Lithium through staged investments.
In February 2023, we received $75 million from LG Chem in exchange for 1,096,535 shares of our common stock at a price of $68.40 per share and in conjunction with a multi-year spodumene concentrate offtake agreement. Share issuance costs associated with the issuance totaled $3.9 million and were accounted for as a reduction in the proceeds from share issuances in our consolidated balance sheets.
As of September 30, 2024, $500 million of securities were available under our shelf registration statement, which expires on September 26, 2027.
13.SEGMENT REPORTING
We report our segment information in the same way management internally organizes the business in assessing performance and making decisions regarding allocation of resources in accordance with ASC Topic 280, “Segment Reporting.” We have a single reportable operating segment that operates as a single business platform. In reaching this conclusion, management considered the definition of the CODM, how the business is defined by the CODM, the nature of the information provided to the CODM, how the CODM uses such information to make operating decisions, and how resources and performance are assessed. The results of operations provided to and analyzed by the CODM are at the consolidated level, and accordingly, key resource decisions and assessment of
performance are performed at the consolidated level. We have a single, common management team and our cash flows are reported and reviewed at the consolidated level only with no distinct cash flows at an individual business level.
14.FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.
We follow ASC Topic 820, “Fair Value Measurement and Disclosure,” which establishes a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy categorizes assets and liabilities measured at fair value into one of three different levels depending on the observability of the inputs employed in the measurement. The three levels are defined as follows:
Level 1:Quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2:Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable for the asset or liability, including quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, inputs other than quoted prices that are observable for the asset or liability and inputs that are derived from observable market data by correlation or other means.
Level 3:Inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The level within which the financial asset or liability is classified is determined based on the lowest level of significant input to the fair value measurement.
Measurement of Fair Value
Our material financial instruments consist primarily of cash and cash equivalents, investments in marketable and equity securities, trade and other payables, and long-term debt as follows:
•Trade receivables— As of September 30, 2024 and December 31, 2023, we had $1.1 million and $0.6 million of trade receivable, respectively. As of September 30, 2024, $1.1 million consisted of trade receivables from provisional concentrate sales which are recorded at fair value based on Level 2 inputs. The remaining trade receivables approximate fair value due to their short-term nature and are based on Level 1 inputs.
•Debt Obligations—As of September 30, 2024 and December 31, 2023, we had $24.1 million and $0.2 million, respectively, of principal debt outstanding associated with our Credit Facility, Insurance premium financing loan and seller financed loans for properties acquired at Carolina Lithium. The carrying value of our long-term debt approximates its estimated fair value. See Note 11—Debt Obligations.
•Investments in marketable securities—As of September 30, 2024 and December 31, 2023, we had $5.6 million and $0.0 million, respectively, of investments in marketable securities related to our shares in Atlantic Lithium, which are recorded at fair value based on Level 1 inputs. See Note 10—Other Assets and Liabilities.
•Investments in equity securities - As of September 30, 2024 and December 31, 2023, we had $0.2 million and $0.5 million, respectively, of investments in equity securities related to our shares of Ricca, which are recorded at fair value based on Level 2 inputs. See Note 10—Other Assets and Liabilities.
•Other financial instruments—The carrying amounts of cash and cash equivalents and trade and other payables approximate fair value due to their short-term nature and are based on Level 1 inputs.
Level 3 activity was not material for all periods presented.
We are involved from time to time in various claims, proceedings, and litigation. We establish reserves for specific legal proceedings when we determine that the likelihood of an unfavorable outcome is probable, and the amount of loss can be reasonably estimated.
In July 2021, a class of putative plaintiffs filed a lawsuit against us in the U.S. District Court for the Eastern District of New York claiming violations of the Exchange Act. The complaint alleged, among other things, that we made false and/or misleading statements and/or failed to make disclosure relating to proper and necessary permits. In February 2022, the Court appointed a lead plaintiff in this action, and the lead plaintiff filed an amended complaint in April 2022. On July 18, 2022, we moved to dismiss the amended complaint. On September 1, 2022, the lead plaintiff filed his Memorandum of Law in Opposition to our Motion to Dismiss. On October 7, 2022, we filed our Reply Memorandum in support of our Motion to Dismiss. On January 18, 2024, the Court granted our Motion to Dismiss the amended complaint. The lead plaintiff’s deadline to appeal the decision of the Court expired. As of the date of this Quarterly Report, the lead plaintiff did not appeal the decision of the Court.
On July 5, 2022, Brad Thomascik, a purported shareholder of the Company’s equity securities, filed a shareholder derivative lawsuit in the U.S. District Court for the Eastern District of New York. On behalf of the Company, the lawsuit purported to bring claims against certain of the Company’s officers and directors. The complaint alleged that the defendants breached their fiduciary duties in connection with the Company’s statements regarding the timing and status of government permits for Carolina Lithium in North Carolina at various times between March 16, 2018 and July 19, 2021. No litigation demand was made to the Company in connection with this action. The lawsuit focused on the same public statements as the shareholder derivative suit described below. In September 2022, the parties agreed to a stipulation to stay the proceeding pending resolution of the motion to dismiss in the securities law matters described above, and the Court ordered the case stayed in October 2022.
On October 14, 2021, Vincent Varbaro, a purported holder of Piedmont Australia’s American Depositary Shares and the Company’s equity securities, filed a shareholder derivative suit in the U.S. District Court for the Eastern District of New York, purporting to bring claims on behalf of the Company against certain of the Company’s officers and directors. The complaint alleged that the defendants breached their fiduciary duties in connection with the Company’s statements regarding the timing and status of government permits for Carolina Lithium in North Carolina, at various times between March 16, 2018 and July 19, 2021. No litigation demand was made to the Company in connection with this action. In December 2021, the parties agreed to a stipulation to stay the proceeding pending resolution of the motion to dismiss in the securities law matters described above, and the Court ordered the case stayed.
On March 11, 2024, after dismissal was granted in the securities law matters described above, the parties in the Thomascik and Varbaro cases stipulated to dismiss their two actions with prejudice. Accordingly, the court directed that each of the Thomascik and Varbaro cases be closed on March 13, 2024 and March 22, 2024, respectively.
On February 6, 2024, the SEC issued an investigative subpoena to the Company primarily seeking documents and information relating to the Company’s mining-related investments and operations outside of the U.S. The Company responded in a timely manner and continues to cooperate with the SEC.
On June 6, 2024, four petitioners with residential or business properties near our permitted Carolina Lithium project filed a Petition for a Contested Case Hearing with the North Carolina Office of Administrative Hearings challenging DEMLR’s issuance of our mining permit for the Carolina Lithium project. The petition alleges DEMLR exceeded its authority, acted erroneously, failed to follow proper procedures, acted arbitrarily and failed to act as required by law when issuing our mining permit. On July 3, 2024, we filed a Motion to Intervene in the Contested Case Hearing. On July 8, 2024, the Office of Administrative Hearings granted our Motion to Intervene. We intend to support DEMLR in its defense of the issuance of our mining permit. The parties are currently engaged in discovery.
Asset Retirement Obligations
In 2023, we recognized an asset retirement obligation of $0.4 million related to the acquisition of a monofill disposal facility in Etowah, Tennessee, for Tennessee Lithium. In determining the asset retirement obligation, we calculated the present value of the estimated future cash flows required to reclaim the disturbed areas and perform any required monitoring.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and related notes included elsewhere in our Quarterly Report. References in this Form 10-Q to our Form 10-K refer to our Form 10-K, filed on February 29, 2024.
The following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in our Quarterly Report and those in the sections of our Annual Report for the year ended December 31, 2023 entitled “Risk Factors,” “Cautionary Note Regarding Forward-Looking Statements,” and “Cautionary Note Regarding Disclosure of Mineral Properties.”
Executive Overview & Strategy
We are a U.S.-based development-stage company aiming to become a leading producer of lithium hydroxide in North America. As the world, the American government, and industries mobilize to support global decarbonization through the electrification of transportation, we are poised to become a critical contributor to the U.S. electric vehicle and battery manufacturing supply chains.
Since 2021, electric vehicle and battery companies have announced significant commitments to build new or expanded manufacturing operations across the U.S., which are expected to drive domestic demand for lithium far beyond current or projected capacity over the next decade. Piedmont Lithium, as a U.S.-based company, is well positioned to benefit from federal policies and funding established to facilitate the expedited development of a robust domestic supply chain and clean energy economy, while strengthening national and global energy security. Manufacturing facilities for electric vehicles, batteries, and related components are typically constructed in two to three years; however, the development of lithium resources from exploration to production requires a much longer time frame. We believe this prolonged time frame for resource development poses the greatest challenge to the emerging electrification industry and highlights the critical role of lithium producers.
To support growing U.S. lithium demand, we have spent the past eight years developing a portfolio of four key projects: wholly-owned Carolina Lithium and Tennessee Lithium, and strategic investments in Quebec, Canada, with Sayona Quebec’s NAL, and in Ghana, with Atlantic Lithium’s Ewoyaa. NAL began supplying spodumene concentrate to the market in the third quarter of 2023. Carolina Lithium is being developed as a fully integrated spodumene ore-to-lithium hydroxide project designed to produce 30,000 metric tons of lithium hydroxide annually. During the third quarter of 2024, we made the decision to shift Tennessee Lithium’s planned annual production capacity of 30,000 metric tons of lithium hydroxide to Carolina Lithium via a second production train in a phased development approach. Consolidating our U.S. lithium hydroxide production strategy positions Piedmont to leverage our foundational Carolina Lithium project and deploy capital and technical resources more efficiently.
Our current plan to produce an estimated 60,000 metric tons per year of domestic lithium hydroxide would be significantly accretive to today’s total estimated U.S. annual production capacity of approximately 20,000 metric tons per year. Our lithium hydroxide capacity and revenue generation are expected to be supported by production of, or offtake rights to, approximately 525,000 metric tons of spodumene concentrate annually.
Our projects and strategic investments are being developed on a measured timeline based on prevailing market conditions to manage near-term cash while optimizing future cash flow and long-term value maximization. The development timelines are also subject to permitting, regulatory approvals, funding, and successful project execution.
As we continue to advance our goal of becoming one of the leading manufacturers of lithium products in North America, we expect to capitalize on our competitive strengths, including our life-of-mine offtake agreement with Sayona Quebec, scale and diversification of lithium resources, advantageous locations of projects and assets, access to a variety of funding options, opportunities to leverage our greenfield projects, and a highly experienced management team. Advancements toward this effort are highlighted below.
We continue to engage in activities to strengthen our financial position and business strategy, including decisions to drive prudent capital deployment and cost savings that preserve assets within our portfolio of projects and strategic investments.
•During the third quarter of 2024, Piedmont sold approximately 31,500 dmt of spodumene concentrate and recognized $27.7 million in revenue with a realized sales price of $878 per dmt and a realized cost of sales of $794 per dmt.
•In September 2024, we entered into a working capital facility, whereby we may borrow up to $25.0 million based on the value of committed volumes of spodumene concentrate occurring within the following twelve months. Prepayments, or borrowings, are credited against the outstanding prepayment balance at the time the vessel has completed loading. Interest is payable quarterly at the rate of SOFR plus 2.4%. The Credit Facility expires on December 31, 2027 but may be extended by mutual agreement through December 31, 2028. See Note 11—Debt Obligations.
•During the third and fourth quarters of 2024, we expanded our cost savings efforts associated with our 2024 Cost Savings Plan and further reduced our workforce in October 2024 and lowered third-party spend primarily related to professional fees. We expect to recognize $14 million in annual cost savings in 2024.
•During the third quarter of 2024, we streamlined our U.S. lithium hydroxide production plans in favor of deploying capital and technical resources more efficiently by shifting our proposed Tennessee Lithium conversion capacity to Carolina Lithium. We plan to leverage the Carolina Lithium by adding a second lithium hydroxide production train as part of a phased development approach.
Lithium Projects
Quebec
As of September 30, 2024, we owned an equity interest of 25% in Sayona Quebec. Sayona Mining owned the remaining 75% equity interest in Sayona Quebec. Sayona Quebec owns a portfolio of projects, which includes NAL, Authier, and Tansim. We hold a life-of-mine offtake agreement with Sayona Quebec for the greater of 113,000 dmt or 50% of spodumene concentrate production per year. Our purchases of spodumene concentrate are subject to a price floor of $500 per dmt and a price ceiling of $900 per dmt for 6.0% Li2O spodumene concentrate.
Recent highlights include:
•During the third quarter of 2024, NAL achieved record production of approximately 52,100 dmt of spodumene concentrate, and shipped approximately 49,000 dmt, of which approximately 31,500 dmt were sold to Piedmont.
•During the third quarter of 2024, production at NAL continued to improve in terms of production and utilization with production increasing approximately 5% compared to the prior quarter. With the commissioning of the crushed ore dome in the second quarter of 2024, mill utilization increased to 91%, which is an increase of 10% from the first quarter of 2024.
•During the third quarter of 2024, Sayona Mining announced an increase to the mineral resources estimate at NAL, which included a significant increase to the mineral resources in the measured & indicated categories in accordance with JORC Code requirements.
•In September 2024, NAL achieved safety records with no lost time incidents, no modified duty incidents, and no medical aid incidents.
Ghana
As of September 30, 2024, we owned an equity interest of approximately 5% in Atlantic Lithium. We have a right to acquire a 50% equity interest in Atlantic Lithium Ghana, which includes Atlantic Lithium’s flagship Ewoyaa project, located approximately 70 miles from the Port of Takoradi in Ghana, West Africa. We hold an offtake agreement with Atlantic Lithium for 50% of annual production of spodumene concentrate at market prices on a life-of-mine basis from Ewoyaa.
•In July 2024, the application to grant the Ewoyaa mining lease was submitted to the Ghanaian parliament to undergo the ratification process. The mining lease remains subject to parliamentary ratification as of the date of this Quarterly Report. We
expect advances to Atlantic Lithium for Ewoyaa to decrease in the coming months depending on the timing of mining lease ratification, permitting, and prevailing market conditions.
•In July 2024, Piedmont mandated a financial advisor to develop a funding strategy that includes an offtake partner process to support our share of Ewoyaa construction capital and minimize dilution to Piedmont shareholders.
•In September 2024, Ghana’s Environmental Protections Agency granted an environmental permit to the Ewoyaa project.
•In October 2024, the Ghanaian Minerals Commission issued a Mine Operating Permit in respect of the Ewoyaa project. The receipt of the permit marked an important milestone in achieving the regulatory approvals required to commence project construction. The project, however, remains subject to ratification of the mining lease by the Ghanaian Parliament, ongoing design work, additional regulatory approvals, prevailing market conditions, and project financing.
Carolina Lithium
Carolina Lithium is located in the historic Carolina Tin-Spodumene Belt and is being designed as a fully integrated project with mining, spodumene concentrate production, and lithium hydroxide manufacturing on a single site in Gaston County, North Carolina. At full production, Carolina Lithium is expected to produce 30,000 metric tons per year of lithium hydroxide per conversion train for a total of 60,000 metric tons annually.
Based on our current technical studies, we expect Carolina Lithium to be a low-cost producer of spodumene concentrate and lithium hydroxide and a key contributor to U.S. energy security. The project should benefit from high-quality infrastructure, minimal transportation distances, low energy costs, a deep local talent pool, and proximity to cathode and battery customers as well as by-product markets. The competitive corporate tax regime offered in the U.S., the absence of significant royalties, and the benefits inherent in the Inflation Reduction Act of 2022 should also provide advantages to the project.
Management is actively engaging in discussions with potential strategic partners who have expressed interest in project-level funding for Carolina Lithium. Our goal through the partnership process is to advance the project through ongoing permitting and rezoning activities. The Carolina Lithium funding strategy also includes potential government financing options.
In May 2024, we received the finalized mining permit for the construction, operation, and reclamation of Carolina Lithium following the posting of a $1 million reclamation bond to the state of North Carolina. The NCDEQ approved the permit application on April 12, 2024.
We are considering the timing of the local rezoning process, which is dependent upon the funding strategy, potential partnerships, project development plans, and market dynamics. Engagement continues with community stakeholders, including the Gaston County Board of Commissioners.
In October 2024, the U.S. Department of the Treasury issued final rules for the Inflation Reduction Act’s manufacturing credit (45X) with modifications intended to drive critical mineral processing in the U.S. The new rules support the application of the 10% manufacturing credit to direct and indirect material costs, which could materially improve the economics of U.S. projects like Carolina Lithium.
Tennessee Lithium
Tennessee Lithium was planned as a merchant lithium hydroxide manufacturing plant to produce 30,000 metric tons per year of lithium hydroxide.
As part of our streamlined U.S. production strategy, we converted the proposed Tennessee Lithium project plans to a second lithium hydroxide train in a phased development for Carolina Lithium. The combined conversion facilities should allow us to significantly increase U.S. lithium hydroxide production capacity while deploying capital and technical resources more efficiently.
Killick Lithium
As of September 30, 2024, we owned an equity interest of approximately 20% in Vinland Lithium, which is a Canadian-based entity jointly owned with Sokoman Minerals and Benton Resources. Vinland Lithium owns Killick Lithium, which owns a large exploration
property prospective for lithium located in southern Newfoundland, Canada. As of September 30, 2024, we have invested $2.8 million in Vinland Lithium.
As part of an earn-in agreement with Vinland Lithium, we have the right to acquire up to a 62.5% equity interest in Killick Lithium through staged-investments, which may be paid in shares of our stock. As part of our investment in Vinland Lithium, we entered into a marketing agreement with Killick Lithium for 100% marketing rights and the right of first refusal to purchase 100% of all lithium products produced by Killick Lithium on a life-of-mine basis at competitive commercial rates.
Critical Accounting Polices and Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our unaudited consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these unaudited consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the consolidated financial statements as well as the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
There have been no changes in the significant accounting policies followed by us during the nine months ended September 30, 2024 from those disclosed in our Annual Report for the year ended December 31, 2023.
Components of our Results of Operations
Revenue
We recognize revenue from product sales at a point in time when performance obligations are satisfied under the terms of contracts with our customers. A performance obligation is deemed to be satisfied when control of the product is transferred to our customer, which is typically upon delivery to the shipping carrier. Where a contract contains more than one distinct performance obligation, the transaction price is allocated to each performance obligation based on the standalone selling price of each performance obligation, although these situations do not occur frequently and are generally not built into our contracts. Revenue is measured as the amount of consideration expected to be received in exchange for transferring the goods. In the case of variable consideration arrangements, we estimate variable consideration as the revenue to which we expect to be entitled. Initial pricing is typically billed 5 days to 30 days after the departure of the shipment and paid between 15 days to 75 days. Final adjustments to prices may take longer to resolve. When the final price has not been resolved by the end of a reporting period, we estimate the expected sales price based on the initial price, market pricing and known quality measurements. We warrant to our customers that our products conform to mutually agreed product specifications.
Exploration Costs
We incur costs in resource exploration, evaluation, and development during the different phases of our resource development projects. Exploration costs incurred before the declaration of proven and probable mineral reserves, which primarily include exploration, drilling, engineering, metallurgical testwork, site-specific reclamation, and compensation for employees associated with exploration activities, are expensed as incurred. After proven and probable mineral reserves are declared, exploration and mine development costs necessary to bring the property to commercial capacity or increase the capacity or useful life are capitalized.
Selling, General and Administrative Expenses
Selling, general and administrative expenses relate to overhead costs, such as employee compensation and benefits for corporate management and office staff including accounting, legal, human resources, and other support personnel, professional service fees, insurance, and costs associated with maintaining our corporate headquarters. Included in employee compensation costs are cash and stock-based compensation expenses.
Restructuring and Impairment Charges
Restructuring, impairment, and other exit costs represent expenses incurred in connection with certain cost reduction programs that we have implemented, and consists of the costs of asset impairments, employee termination costs, lease and other contract termination charges and other costs of exiting activities. A liability for costs associated with an exit or disposal activity is measured at its fair value
when the liability is incurred. Expenses for one-time termination benefits are recognized at the date the employee is notified, unless the employee must provide future service, in which case the benefits are expensed ratably over the future service period. Liabilities related to termination of an operating lease or contract are measured and recognized at fair value when the contract does not have any future economic benefit to the entity and the fair value of the liability is determined based on the present value of the remaining lease obligations, adjusted for the effects of deferred items recognized under the lease, and reduced by estimated sublease rentals that could be reasonably obtained for the property. The assumptions in determining such estimates include anticipated timing of sublease rentals and estimates of sublease rental receipts and related costs based on market conditions. All other costs related to an exit or disposal activity are expensed as incurred. Refer to Note 4—Restructuring and Impairment for further information.
Loss From Equity Method Investments
Loss from equity method investments reflects our proportionate share of the net income (loss) resulting from our current and legacy investments in Sayona Mining, Sayona Quebec, Vinland Lithium, and Atlantic Lithium. Investments recorded under the equity method are adjusted each period, on a one-quarter lag, for our share of each investee’s income (loss). If a decline in the value of an equity method investment is determined to be other than temporary, we record any related impairment as a component of share of earnings or losses of the equity method investee in the current period. Our equity method investments are an integral and integrated part of our ongoing operations. We have determined this justifies a more meaningful and transparent presentation of our proportional share of income (loss) in our equity method investments as a component of our income (loss) from operations.
Other Income (Loss)
Other income (loss) consists of interest income, interest expense, foreign currency exchange gain (loss), gain (loss) on equity securities, gain (loss) on sale of assets, and gain (loss) on sale of equity method investments. Interest income consists of interest earned on our cash and cash equivalents. Interest expense consists of interest incurred on long-term debt related to noncash acquisitions of mining interests financed by sellers for Carolina Lithium as well as interest incurred for lease liabilities. Foreign currency exchange gain (loss) primarily relates to our foreign bank accounts denominated in Canadian dollars and Australian dollars and marketable securities denominated in Australian dollars. Gain (loss) on equity securities relates to realized and unrealized gains (losses) of our investments in marketable and equity securities. Gain (loss) on sale of assets primarily relates to our sale or disposal of property, plant and mine development assets. Gain (loss) on sale of equity method investments relates to our reduction in ownership of Sayona Mining and Atlantic Lithium due to: (i) gain (loss) on dilution due to their issuance of additional shares through public offerings and employee stock compensation grants while they were accounted for under the equity method, and; (ii) gain (loss) on the sale of shares of our equity method investments.
Results of Operations
Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023
Revenue decreased $19.5 million, or 41.3%, to $27.7 million in the three months ended September 30, 2024 as compared to $47.1 million in the three months ended September 30, 2023. Sales volume of spodumene concentrate increased approximately 2,500 dmt, or 8.6%, to approximately 31,500 dmt in the three months ended September 30, 2024 as compared to approximately 29,000 dmt in the three months ended September 30, 2023. The lithium market experienced dramatic declines in pricing in 2024 and the second half of 2023, which caused revenue to decline sharply despite the modest increase in sales volume. All revenue was generated from sales of spodumene concentrate produced at NAL and purchased as part of our purchase offtake agreement with Sayona Quebec. Sales of spodumene concentrate commenced in August 2023.
Our realized prices were $878 per dmt of spodumene concentrate (approximately 5.4% Li2O grade) and $1,624 per dmt of spodumene concentrate (approximately 5.3% Li2O grade) in the three months ended September 30, 2024 and 2023, respectively. The decline in lithium prices resulted in realized prices declining $746 per dmt, or 45.9%, in the three months ended September 30, 2024 as compared to the three months ended September 30, 2023.
Realized price is the average estimated price, net of certain distribution and other fees, and includes referenced pricing data through September 30, 2024 and 2023 in the three months ended September 30, 2024 and 2023, respectively, and may be subject to final adjustment. For certain contracts, the realized price is subject to final adjustments, which may cause the realized price to be higher or lower than the average estimated realized price, based on future market-price movements. For any shipment that has not yet price settled, we estimate the final sales price based on current and expected market conditions and known quality measurements. Any adjustments to the estimated (or provisional) sales price will be reflected in subsequent periods.
Gross Profit and Gross Profit Margin
Gross profit decreased $21.1 million, or 88.8%, to $2.7 million in the three months ended September 30, 2024 as compared to $23.8 million in the three months ended September 30, 2023. Gross profit margin declined to 9.6% in the three months ended September 30, 2024 from 50.4% in the three months ended September 30, 2023. Gross profit and gross profit margin in the three months ended September 30, 2023 were driven by our preferential offtake supply agreement with Sayona Quebec, which includes a price ceiling of $900 per dmt. The declines in gross profit and gross profit margin were due to the steep decline in lithium prices.
Our realized costs of sales were $794 per dmt of spodumene concentrate and $805 per dmt of spodumene concentrate in the three months ended September 30, 2024 and 2023, respectively. Realized cost of sales is the average cost of sales based on our offtake pricing agreement with Sayona Quebec for the purchase of spodumene concentrate at a market price subject to a floor of $500 per dmt and a ceiling of $900 per dmt, with adjustments for product grade, freight, and insurance.
Exploration Costs
Exploration costs decreased $0.4 million, or 92.6%, to less than $0.1 million in the three months ended September 30, 2024 as compared to $0.5 million in the three months ended September 30, 2023. The decrease in exploration costs was primarily driven by a decrease in exploration and engineering activities related to new project targets. As part of the 2024 Cost Savings Plan, we have substantially reduced, or in certain cases eliminated, exploration costs in response to the lithium market downturn.
Selling, General and Administrative Expenses
Selling, general and administrative expenses decreased $1.7 million, or 15.4%, to $9.5 million in the three months ended September 30, 2024 as compared to $11.2 million in the three months ended September 30, 2023. The decrease in selling, general and administrative expenses was primarily due to cost savings recognized as part of our 2024 Cost Savings Plan, which included lower employee compensation costs in connection with our 28% reduction in workforce during the first quarter of 2024 and lower third-party spend. The reductions were partially offset by increased legal fees primarily related to shelf registration costs and other initiatives. Total stock-based compensation expense included in selling, general and administrative expenses was $2.2 million and $3.0 million in the three months ended September 30, 2024 and 2023, respectively.
(Loss) Income from Equity Method Investments
Loss from equity method investments increased $7.4 million, or 191.2%, to $3.5 million in the three months ended September 30, 2024 as compared to income from equity method investments of $3.9 million in the three months ended September 30, 2023. The loss from equity method investments of $3.5 million in the three months ended September 30, 2024reflects our proportionate share of loss resulting from our equity investments in Sayona Quebec and Vinland Lithium. The income from equity method investments of $3.9
million in the three months ended September 30, 2023 reflects our proportionate share of income resulting from our equity investments in Sayona Mining, Sayona Quebec, and Atlantic Lithium. Our interest in Vinland Lithium was acquired in October 2023. The increase in loss from equity method investments was driven by income declines of $7.0 million and $1.1 million in our share of income in Sayona Quebec and Sayona Mining, respectively, partially offset by a decrease of $0.8 million in our share of loss in Atlantic Lithium.
Restructuring and Impairment Charges
We initiated our 2024 Cost Savings Plan in the first quarter of 2024. As part of our 2024 Cost Savings Plan, we recognized restructuring and impairment chargesof $4.6 million in the three months ended September 30, 2024. Restructuring and impairment charges consisted of $4.1 million in impairment charges related to land, capitalized construction and development costs, and other fixed assets related to Tennessee Lithium and exit costs of $0.5 million related to the planned exit of our monofill disposal facility in Etowah, Tennessee, and the consolidation of our corporate office to a single location in Belmont, North Carolina. There were no restructuring or impairment charges in the three months ended September 30, 2023.
Other (Loss) Income
Other loss increased approximately $10.7 million, or 119.7%, to a loss of $1.8 million in the three months ended September 30, 2024 as compared to other income of $9.0 million in the three months ended September 30, 2023. Included in other loss for the three months ended September 30, 2024, was an unrealized loss on marketable securities of $2.6 million, partially offset by net interest income of $0.8 million and a gain on foreign currency exchange of $0.3 million. Included in other income for the three months ended September 30, 2023, was interest income of $1.0 million, and a gain on dilution of equity method investments of $8.0 million.
Income Tax Expense
Income tax expense decreased $2.0 million to nil in the three months ended September 30, 2024 as compared to income tax expense of $2.0 million in the three months ended September 30, 2023. The decrease in income tax expense was due to the decreased pre-tax impact of the gain on dilution in Sayona Mining in the three months ended September 30, 2023.
Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023
Nine Months Ended September 30,
(in thousands)
2024
2023
$ Change
% Change
Revenue
$
54,291
$
47,127
$
7,164
15.2%
Costs of sales
50,321
23,363
26,958
115.4%
Gross profit
3,970
23,764
(19,794)
(83.3)%
Gross profit margin
7.3
%
50.4
%
Exploration costs
97
1,668
(1,571)
(94.2)%
Selling, general and administrative expenses
26,576
31,793
(5,217)
(16.4)%
Total operating expenses
26,673
33,461
(6,788)
(20.3)%
Loss from equity method investments
(13,864)
(1,565)
(12,299)
785.9%
Restructuring and impairment charges
(6,657)
—
(6,657)
*
Loss from operations
(43,224)
(11,262)
(31,962)
283.8%
Other (loss) income
(13,501)
18,045
(31,546)
(174.8)%
Income tax (benefit) expense
(3,095)
3,170
(6,265)
(197.6)%
Net (loss) income
$
(53,630)
$
3,613
$
(57,243)
*
__________________________
* Not meaningful.
Revenue
Revenue increased $7.2 million, or 15.2%, to $54.3 million in the nine months ended September 30, 2024 as compared to $47.1 million in the nine months ended September 30, 2023. Sales volume of spodumene concentrate increased approximately 32,000 dmt, or 110.3%, to approximately 61,000 dmt in the nine months ended September 30, 2024 as compared to approximately 29,000 dmt in
the nine months ended September 30, 2023. The increase in revenue was due to the increase in sales volume as sales of spodumene concentrate commenced in September 2023. Greatly offsetting the increase in revenue was a decrease driven by the steep decline in lithium prices, as discussed above. All revenue was generated from sales of spodumene concentrate, which was produced at NAL and purchased as part of our purchase offtake agreement with Sayona Quebec. Sales of spodumene concentrate commenced in August 2023.
Our realized prices were $890 per dmt of spodumene concentrate (approximately 5.5% Li2O grade) and $1,624 per dmt of spodumene concentrate (approximately 5.3% Li2O grade) for the nine months ended September 30, 2024 and 2023, respectively. The decline in lithium prices resulted in realized prices declining $734 per dmt, or 45.2%, in the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023.
Realized price is the average estimated price, net of certain distribution and other fees, and includes referenced pricing data up to September 30, 2024 and 2023 for the nine months ended September 30, 2024 and 2023, respectively, and may be subject to final adjustment. For certain contracts, the final adjusted price may be higher or lower than the average estimated realized price based future market price movements. We have estimated the final sales pricing based on expected market conditions and known quality measurements. Any adjustments to the sales price will be reflected in subsequent periods.
Gross Profit and Gross Profit Margin
Gross profit decreased $19.8 million, or 83.3%, to $4.0 million in the nine months ended September 30, 2024 as compared to $23.8 million in the nine months ended September 30, 2023. Gross profit margin declined to 7.3% in the nine months ended September 30, 2024 from 50.4% in the nine months ended September 30, 2023. Gross profit and gross profit margin in the nine months ended September 30, 2023 were driven by our preferential offtake supply agreement with Sayona Quebec, which includes a price ceiling of $900 per dmt. The declines in gross profit and gross profit margin were due to the steep decline in lithium prices.
Our realized costs of sales were $825 per dmt of spodumene concentrate and $805 per dmt of spodumene concentrate in the nine months endedSeptember 30, 2024 and 2023, respectively. Realized cost of sales is the average cost of sales based on our offtake pricing agreement with Sayona Quebec for the purchase of spodumene concentrate at a market price subject to a floor of $500 per dmt and a ceiling of $900 per dmt, with adjustments for product grade, freight, and insurance.
Exploration Costs
Exploration costs decreased $1.6 million, or 94.2%, to $0.1 million in the nine months ended September 30, 2024 as compared to $1.7 million in the nine months ended September 30, 2023. The decrease in exploration costs was primarily driven by a decrease in exploration and engineering activities related to new project targets. As part of the 2024 Cost Savings Plan, we have substantially reduced, or in certain cases eliminated, exploration costs in response to the lithium market downturn.
Selling, General and Administrative Expenses
Selling, general and administrative expenses decreased $5.2 million, or 16.4%, to $26.6 million in the nine months ended September 30, 2024 as compared to $31.8 million in the nine months ended September 30, 2023. The decrease in selling, general and administrative expenses was primarily due to cost savings recognized as part of our 2024 Cost Savings Plan, which included lower professional and consulting fees and lower employee compensation costs and travel costs in connection with our 28% reduction in workforce during the first quarter of 2024. Stock-based compensation expense included in selling, general and administrative expenses was $6.9 million and $7.3 million in the nine months ended September 30, 2024 and 2023, respectively.
Loss from Equity Method Investments
Loss from equity method investments increased $12.3 million, or 785.9%, to $13.9 million in the nine months ended September 30, 2024 as compared to $1.6 million in the nine months ended September 30, 2023. The loss of from equity method investments of $13.9 million in the nine months ended September 30, 2024reflects our proportionate share of loss resulting from our equity investments in Sayona Mining, Sayona Quebec, Atlantic Lithium, and Vinland Lithium. The loss from equity method investments of $1.6 million in the nine months ended September 30, 2023 reflects our proportionate share of loss resulting from Sayona Mining, Sayona Quebec, and Atlantic Lithium. Our interest in Vinland Lithium was acquired in October 2023. The increase in loss from equity method investments was driven by income declines of $12.3 million and $1.1 million in our share of income in Sayona Quebec and Sayona Mining, respectively, partially offset by a decrease of $1.3 million in our share of loss in Atlantic Lithium.
We initiated our 2024 Cost Savings Plan in the first quarter of 2024. As part of our 2024 Cost Savings Plan, we recognized restructuring and impairment charges of $6.7 million in the nine months ended September 30, 2024. Restructuring and impairment charges consisted of $4.1 million in impairment charges related to land, capitalized construction and development costs, and other fixed assets related to Tennessee Lithium, $1.3 million in severance and employee benefits costs, $0.6 million in exit costs related to the planned exit of our monofill disposal facility in Etowah, Tennessee, and the consolidation of our corporate office to a single location in Belmont, North Carolina, $0.6 million in stock-based compensation related to accelerated vesting of certain stock-based compensation awards in connection with our workforce reduction, and $0.1 million in other restructuring related expenses. There were no restructuring or impairment charges in the nine months ended September 30, 2023.
Other (Loss) Income
Other loss increased $31.5 million, or 174.8%, to a loss of $13.5 million in the nine months ended September 30, 2024 as compared to other income of $18.0 million in the nine months ended September 30, 2023. The increase in other loss was driven by our loss on sale of equity method investments related to Sayona Mining of $13.9 million in the nine months ended September 30, 2024 as compared to a gain on dilution related to Sayona Mining of $15.2 million in the nine months ended September 30, 2023. Other loss for the nine months ended September 30, 2024 also included a loss on the sale of assets of $0.7 million, partially offset by an unrealized gain on mark-to-market securities of $1.0 million. Interest income decreased $0.7 million primarily due to lower cash balances and interest expense increased $0.4 million primarily due to higher debt balances.
Income Tax (Benefit) Expense
Income tax benefit was $3.1 million in the nine months ended September 30, 2024 as compared to income tax expense of $3.2 million in the nine months ended September 30, 2023. The increase in income tax benefit was mainly due to the tax benefit generated from the loss on equity investments related to the sale of our equity interest in Sayona Mining in the three months ended March 31, 2024.
Liquidity and Capital Resources
Overview
As of September 30, 2024, our principal sources of liquidity were cash and cash equivalents of $64.4 million and a $25.0 million Credit Facility with a remaining borrowing capacity of approximately $7.0 million. Cash and cash equivalents consisted of institutional insured liquid deposits and cash deposit accounts. The vast majority of our cash and cash equivalents were held in the U.S and covered by FDIC insured limits. Our predominant source of cash to date has been generated through equity financing from issuances of our common stock. We have a shelf registration statement which allows us to issue up to $500 million of equity as of September 30, 2024. Our shelf registration statement expires on September 26, 2027. During the second quarter of 2024, we entered into an ATM Program with a registered agent for potential, future issuances of our common stock under our shelf registration statement. There are many factors that could significantly impact our ability to raise funds through equity and debt financing as well as influence the timing of future cash flows.
Our primary uses of cash during the nine months ended September 30, 2024 consisted of: (i) settlement payments totaling $29.2 million associated with spot shipment sales of spodumene concentrate as a result of a decline in lithium prices; (ii) equity investments in Sayona Quebec during the first half of 2024 mainly for capital expenditures at NAL related to the completion of a crushed ore dome and finalization of its operational restart totaling $15.0 million; (iii) advances to Atlantic Lithium primarily for exploration and evaluation activities, certain development activities, and permitting and approval activities related to our investment in Ewoyaa totaling $10.0 million; (iv) capital expenditures primarily related to engineering costs of $4.5 million for Tennessee Lithium; (v) development expenditures of $2.8 million and purchases of real property and associated mining interests of $3.2 million associated with Carolina Lithium; (vi) cash expenditures associated with our 2024 Cost Savings Plan of $1.7 million; and (vii) general and administrative costs related to our corporate expenses.
On September 11, 2024, we entered into a Credit Facility that enables us to borrow up to $25.0 million. The Credit Facility expires on December 31, 2027 but may be extended by mutual agreement through December 31, 2028. Borrowings are based on future, committed volumes of spodumene concentrate. Interest is payable quarterly at the rate of SOFR plus 2.4%. In the event the Company experiences a material change in creditworthiness, the lender has the right to modify the payment terms of the Credit Facility including acceleration of repayment up to the full amount of any outstanding borrowings.
During the first quarter of 2024, we initiated the 2024 Cost Savings Plan to reduce annual operating spend by $10 million mainly within our corporate overhead, defer capital spending to 2025 and beyond, and limit cash investments in and advances to affiliates. We achieved our $10 million annual run-rate target during the second quarter of 2024 through a 28% workforce reduction in the first quarter of 2024 and lowering of third-party spending consisting primarily of professional fees and other operating costs. Due to the prolonged lithium market downturn, we expanded our 2024 Cost Savings Plan and further reduced our workforce, including operational and corporate staff, by 32% in October 2024 and expect to achieve an additional $4 million in annual savings for a total of $14 million in annual costs savings. As part of our 2024 Cost Savings Plan, we reduced our total workforce by 48% between February 2024 through October 2024 and recorded $0.5 million and $2.6 million in severance and restructuring related costs in the three and nine months ended September 30, 2024, respectively. We expect to complete our 2024 Cost Savings Plan during the fourth quarter of 2024 and pay the vast majority of cash charges associated with our 2024 Cost Savings Plan in 2024. See Note 4—Restructuring and Impairment, for additional information regarding restructuring charges.
To bolster our cash position and further strengthen our balance sheet, we monetized certain non-core assets during the nine months ended September 30, 2024. During the first quarter of 2024, we sold our common stock holdings in Sayona Mining and a portion of our common stock holdings in Atlantic Lithium for net proceeds totaling $49.1 million. The sale of our equity interests had no impact on our joint ventures or offtake rights with either Sayona Quebec and its NAL operations or the Ewoyaa project with Atlantic Lithium.
While cash and cash equivalents decreased $7.4 million, or 10.3%, to $64.4 million as of September 30, 2024 as compared to $71.7 million as of December 31, 2023, working capital improved $1.8 million, or 5.3%, to $36.6 million as of September 30, 2024 as compared to $34.8 million as of December 31, 2023.
Liquidity Outlook
Our planned cash expenditures for the next twelve months primarily relate to: (i) working capital requirements mainly associated with purchases of spodumene concentrate from NAL and our corporate costs, (ii) continued equity investments in Sayona Quebec for NAL; (iii) continued cash advances to Atlantic Lithium for Ewoyaa; and (iv) real property and associated mineral rights acquisition costs and continued permitting and engineering and testing activities associated with Carolina Lithium.
In 2024, we plan to deliver customer shipments of spodumene concentrate totaling 102,000 dmt to 116,000 dmt and fund capital expenditures totaling $11 million to $12 million and investments in and advances to affiliates totaling $27 million to $29 million. These full-year funding ranges reflect a substantial decrease in capital expenditures and joint venture funding for the second half of 2024 as compared to the first half of 2024 as well as full-year 2024 as compared to full-year 2023. Our outlook for planned capital expenditures and investments in and advances to affiliates is subject to market conditions.
As of September 30, 2024, we have entered into land option agreements in North Carolina totaling $16.2 million. We are not obligated to exercise our land option agreements, and we are able to cancel our land acquisition contracts, at our option with de minimis cancellation costs, during the contract option period. We are evaluating these option agreements with careful consideration and the decision will be influenced by market conditions and other relevant factors that align with our Company’s long-term growth. For land option and acquisition agreements, we expect to incur cash outlays of less than $0.1 million in fourth quarter of 2024, $1.2 million in 2025, and $14.8 million in 2026. These amounts do not include closing costs such as attorneys’ fees, taxes, and commissions. Certain land option agreements and land acquisition contracts become binding upon commencement of construction for Carolina Lithium. We terminated our agreements to acquire land in Tennessee.
As discussed above, we expect to recognize the majority of our $14 million annual run-rate cost savings, as part of our 2024 Cost Savings Plan, in 2024. Due to continued declines in lithium prices and lithium market sentiment, we broadened our 2024 Cost Savings Plan to further reduce our operating cost structure and capital project spending as we properly manage liquidity during the downturn.
Based on our operating plan, which includes our fully implemented 2024 Cost Savings Plan and ongoing access to and utilization of our Credit Facility discussed above, we believe our cash on hand will be sufficient to fund our operations and meet our obligations as they come due for the twelve months following the date our unaudited consolidated financial statements are issued. Additionally, we expect to finance our future cash requirements, including the funding of our lithium projects, through a combination of strategic partnerships, non-core asset sales, equity offerings, and debt financings. Our operating plan and expectation of future financings include estimates and assumptions that may prove to be wrong or may need to modified due many factors, including lithium pricing. As a result, we could deplete our capital resources sooner than we currently expect. No assurances can be given that any additional cost reduction strategies or anticipated funding would be sufficient to meet our needs.
We are evaluating a range of funding options to fund our share of project capital and maintaining a critical focus on funding options that would be non-dilutive to Piedmont Lithium’s shareholders. We plan to utilize two main funding strategies for the construction of Carolina Lithium including an ATVM loan (upon a successful application and receipt of loan from the Department of Energy’s Loan
Programs Office), and a strategic partnering process. Construction of Carolina Lithium is not planned to commence until project financing has been finalized. We have mandated a financial advisor as part of our funding strategy for our share of development capital for Ewoyaa. Our strategy includes the offering of a long-term offtake agreement in exchange for funding to support our capital contribution on a non-dilutive basis to our shareholders.
Our long-term success is dependent upon our ability to successfully raise additional capital or financing or enter into strategic partnership opportunities. Our long-term success is also dependent upon our ability to obtain certain permits and approvals, develop our planned portfolio of projects, earn revenues, and achieve profitability. If we are unable to obtain funding, we would be forced to delay, reduce, or eliminate some or all of our exploration and development activities and joint ventures, which could adversely affect our business prospects and ultimately our ability to operate.
Currently, there are no plans for future cash distributions from any of our equity method investments.
Historically, we have been successful raising cash through equity financing. If we were to issue additional shares of our common stock, it would result in dilution to our existing shareholders. No assurances can be given that any additional financings would be available in amounts sufficient to meet our needs or on terms that would be acceptable to us. See Part I, Item 1A, “Risk Factors” in this Form 10-K for the year ended December 31, 2023.
Cash Flows
The following table is a condensed schedule of cash flows provided as part of the discussion of liquidity and capital resources:
(in thousands)
Nine Months Ended September 30,
Net cash provided by (used in):
2024
2023
Operating activities
$
(36,477)
$
5,403
Investing activities
13,278
(80,473)
Financing activities
15,827
70,318
Net decrease in cash and cash equivalents
$
(7,372)
$
(4,752)
Cash Flows from Operating Activities
Operating activities used $36.5 million and provided $5.4 million in the nine months ended September 30, 2024 and 2023, respectively, resulting in an increase in cash used by operating activities of $41.9 million. The increase was mainly due to an increase of $21.8 million in working capital outflows, primarily driven by settlement payments associated with spot shipment sales of spodumene concentrate as a result of a decline in lithium prices. In addition, we had an increase in net loss of $20.2 million, net of certain noncash items including gain (loss) on sale of equity method investments, impairment of fixed assets, loss from sale of assets, loss from equity method investments, stock compensation expense, gain on marketable securities, and deferred taxes.
Cash Flows from Investing Activities
Investing activities provided $13.3 million and used $80.5 million in the nine months ended September 30, 2024 and 2023, respectively, resulting in an increase in cash provided by investing activities of $93.8 million. The increase was due to (i) the receipt of $49.1 million in net proceeds from the sale of our entire equity interest in Sayona Mining and the partial sale of our equity interest in Atlantic Lithium, (ii) a decrease in capital expenditures of $34.4 million, and (iii) a decrease in contributions to equity investments of $13.7 million. Partially offsetting the increase in investing activities were cash advances of $3.5 million to Atlantic Lithium and Vinland Lithium for project advances to Ewoyaa and Killick Lithium, respectively.
Cash Flows from Financing Activities
Financing activities provided $15.8 million and $70.3 million in the nine months ended September 30, 2024 and 2023, respectively, resulting in a decrease in cash provided by investing activities of $54.5 million. The decrease in cash from financing activities was driven by a $71.1 million decrease in net cash proceeds from issuances of our common stock in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. In February 2023, we received net proceeds of $71.1 million from LG Chem in exchange for 1,096,535 shares of our common stock in conjunction with a multi-year spodumene concentrate offtake agreement. In addition, payments to tax authorities for employee share-based compensation and payments on debt and financing arrangements increased $0.2 million and $1.2 million, respectively, compared to the prior year period. These decreases were partially offset by an increase of $18.0 million in proceeds from our Credit Facility.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
There have been no material changes in our risk factors from those disclosed in Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report for the year ended December 31, 2023.
Item 4. Controls and Procedures.
Our management, under supervision and with the participation of our Chief Executive Officer (our Principal Executive Officer) and Chief Financial Officer (our Principal Financial Officer and Principal Accounting Officer), evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of September 30, 2024. Based on the evaluation of our disclosure controls and procedures, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of September 30, 2024. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.
Changes in Internal Control over Financial Reporting
There were no changes in internal control over financial reporting identified in the evaluation for the quarter ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Information regarding legal proceedings is contained in Note 15—Commitments and Contingencies of our unaudited consolidated financial statements contained in this report and is incorporated herein by reference.
Item 1A. RISK FACTORS.
There have been no material changes in our risk factors from those disclosed in Part I, Item 1A, “Risk Factors” in our Annual Report for the year ended December 31, 2023.
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
None.
Item 3. DEFAULTS UPON SENIOR SECURITIES.
None.
Item 4. MINE SAFETY DISCLOSURES.
Not applicable because we do not currently operate any mines subject to the U.S. Federal Mine Safety and Health Act of 1977.
Item 5. OTHER INFORMATION.
During the three months ended September 30, 2024, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule10b5-1 trading arrangement,” as each term is defined in item 408(a) of Regulation S-K.
Amended and Restated Certificate of Incorporation of Piedmont Lithium Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K12B filed on May 18, 2021)
Amended and Restated Bylaws of Piedmont Lithium Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on February 24, 2023)
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Piedmont Lithium Inc.
(Registrant)
Date: November 12, 2024
By:
/s/ Michael White
Michael White
Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)
