Tesla (TSLA) signs lithium supply agreement with North Carolina project, sends stock up 200%

Tesla has signed a lithium supply agreement with Piedmont Lithium’s North Carolina project — sending the stock price of the latter up 200%.

Piedmont Lithium, an Australia-based junior lithium mining company developing a project in North Carolina, announced that it signed a deal with Tesla.

The company wrote in a press release:

“The Agreement is for an initial five-year term on a fixed-price binding purchase commitment from the delivery of first product, and may be extended by mutual agreement for a second five-year. The Agreement covers a fixed commitment representing approximately one-third of Piedmont’s planed SC6 production of 160,000 tonnes per annum for the initial five-year term as well as an additional quantity to be delivered at Tesla’s option. The SC6 sales are expected to generate between 10-20% of Piedmont’s total revenues from its proposed integrated mine-to-hydroxide project for the initial five-year term. The agreement is conditional upon Tesla and Piedmont agreeing to a start date for spodumene concentrate deliveries between July 2022 and July 2023 based on the development schedules of both parties.”

The project is still under development, and it’s going to need more investment to reach production, but that’s going to be easier to secure with a supply agreement with Tesla for a third of the project’s planned production capacity.

Keith D. Phillips, President and Chief Executive Officer, commented: 

“We are excited to be working with Tesla, which represents the start of the first US domestic lithium supply chain and a disruption to the current value chain.  The Agreement highlights the strategic importance of Piedmont’s unique American spodumene deposit and confirms the trend toward spodumene as the preferred feedstock for the lithium hydroxide required in high-nickel batteries.”

The announcement sent Piedmont’s stock up over 200% briefly on Monday. The news comes after Tesla announced its battery supply plan last week, including the production of its own battery cells and even the production of its own lithium.

The automaker acquired lithium claims on 10,000 acres in Nevada. However, Tesla made it clear that it would still need to rely on other suppliers due to the volume of batteries it plans to need over the next decade.