Piedmont Lithium to offload its stake in Sayona Mining for $59.9m

Leading battery metals business Piedmont Lithium (ASX: PLL) is expected to add approximately $59.9 million to its balance sheet through the sale of the remaining shares it holds in its Quebec joint venture (JV) partner Sayona Mining (ASX: SYA).

The announcement follows the recent confirmation that Piedmont had laid off a significant percentage of its workforce as it moves to rein in costs at a time when lithium prices have tumbled significantly.

President and chief executive officer Keith Phillips said Piedmont’s decision to divest the Sayona shares aligns with the company’s commitment to maintaining a prudent balance sheet.

“This transaction underscores our commitment to delivering long-term value for Piedmont shareholders,” he said.

“We acquired our initial Sayona shares as part of our strategic investment in the Sayona Quebec JV and will recognise a meaningful gain on the investment.”

“We remain fully committed to our JV with Sayona, with a particular focus on the ongoing ramp-up of North American Lithium (NAL), the largest lithium operation in North America.”

“Our 25% JV interest and associated offtake agreement are core assets of Piedmont and we look forward to continuing to work closely with our partners at Sayona to supply Inflation Reduction Act-qualified lithium resources critical to the US electric vehicle supply chain.”

Piedmont acquired a 12% equity interest in Sayona Mining and a 25% interest in Sayona Quebec in 2021.

Significant asset

Sayona Quebec owns the producing NAL, Authier lithium and Tansim lithium projects.

NAL successfully restarted production and began delivering commercial shipments of spodumene concentrate in 2023.

It is the largest producing spodumene mine in North America and one of just a handful of producing lithium hard rock mines in the world.

Piedmont holds an offtake agreement to purchase the greater of 113,000 tonnes or 50% of Sayona Quebec’s spodumene concentrate production per year on a life-of-mine basis.

Piedmont has agreed to offload 1,152.2m shares of Sayona for $0.052 per share through a secondary block sale via Canaccord Genuity.

Following the transaction, it will no longer hold any Sayona shares.

Capital spending cuts

In early February, Piedmont reported it intended to reduce its capital spending in 2024 and control operating expenses through expense management, including a recently completed 27% reduction in its workforce.

“These cost reduction actions, while difficult, are necessary to position the company for the long-term,” Mr Phillips said.

“Lithium prices have fallen sharply and the market consensus is currently negative.”

“However, lithium has been a cyclical business over the past decade with trough markets in pricing generally followed by new record highs.”

“As they say in the mining business, ‘the solution to low prices is low prices’ and announcements of capacity curtailments and new project deferrals have recently become commonplace, with more likely to come.”

“At today’s lithium prices and equity valuations, new project development is expected to be challenging for all and if electric vehicle markets continue to grow, then another period of lithium shortages appears likely to follow.”

“We believe we are extremely well-positioned as a partner in North America’s only producing spodumene mine and in an exceptional low-capex development project in Africa, with tactical optionality to build downstream businesses in two locations in the United States,” he added.

“We have taken a series of measures we believe are judicious to protect shareholder value in this downturn, while remaining strategically positioned for the lithium market recovery that we foresee.”