electric vehicle plug in and charging

U.S. electric vehicle (EV) sales may be finally going parabolic.

In 2018, total U.S. EV sales came in at 361,307 for the year, up 81% over 2017.

While much of that growth can be traced directly to the success of the Tesla (NASDAQ: TSLA) Model 3, what may have been missed by many is the extensive EV push by other major automakers who began retooling their production lines in 2018 to prepare for the next wave of EV sales.

There are several new mass-market EVs available with over 200 miles of electric range, such as the Kia Soul and Kia Niro. At the same time, brands such as Mercedes, BMW, Porsche, Jaguar and Audi are launching headline-grabbing high-performance electric cars — and putting real pressure on Tesla for the first time.

Disassembling the battery of an electric vehicle engine.

What’s driving this new surge in EV options? In simplest terms: battery costs.

While policy and consumer behavior are difficult to predict, battery costs are coming down fast, having fallen 85% since 2010. We're already ahead of lithium-ion battery costs projected for 2030. And with more than 70 battery gigafactories under development around the world, according to Benchmark Minerals, battery costs are expected to fall 15% per year going forward.

While battery costs, and thus EV costs, are coming down, demand for lithium, a key metal used in not just EV batteries, but also a plethora of tech devices, is soaring.

Lithium demand for EVs and other tech devices is expected to increase 650% by 2027.

U.S. government officials met with executives from automakers and lithium miners in early May to begin developing a national EV supply chain strategy.

While automakers are expanding their EV lineups and battery manufacturers are ramping capacity, investing billions in the new technology, they are reliant on mineral imports without a major push to develop more domestic mines and processing facilities.

Electric car lithium battery pack and power connections.

China produces nearly two-thirds of the world’s lithium-ion batteries, compared to 5% for the U.S., and controls most of the world’s lithium processing facilities, according to data from Benchmark Minerals Intelligence.

U.S. imports of lithium have nearly doubled since 2014 due in part to rising demand from Tesla, SK Innovation Co and others building battery plants in the country, according to the U.S. Geological Survey.

In May 2018 the U.S. Department of the Interior established a list of 35 critical minerals considered “vital to the Nation’s security and economic prosperity.” Citing its use in batteries, lithium is included as one of those 35 critical minerals, and efforts are underway to develop strategies to reduce the country’s reliance on foreign imports.

“We need to find ways to more efficiently develop our nation’s domestic critical mineral supply because these resources are vital to both our national security and our economy,” said North Dakota Senator John Hoeven, a member of the Senate’s Energy and Natural Resources Committee.

“Perhaps the world’s best located lithium development project”
- Canaccord Genuity

Piedmont project location map out

One of only a handful of pure-play lithium companies listed in the U.S., Piedmont Lithium (NASDAQ: PLL) is developing a hard rock lithium deposit 30 miles west of Charlotte, North Carolina.

North Carolina was previously responsible for producing most of the world’s lithium from the 1950s to the 1980s. As both Albemarle (NYSE: ALB) and FMC Corp, now Livent (NYSE: LTHM), saw their mines mature, production was shifted from hard rock in North Carolina to brines in South America.

This shift opened an opportunity for Piedmont, who has accumulated its land package by optioning parcels from local landowners, piecing together a valuable asset in a prime location with excellent access to infrastructure and transportation, low cost operating environment, and proximity to existing lithium chemical processing plants.

Mechanical processing used to refine lithium spodumene concentrate

This prime location gives Piedmont’s project a significant strategic advantage as being one of the few domestic lithium development opportunities in what is the world’s second largest auto market.

Located close to both end-users and potential senior industry partners, the aim is to develop a strategic, U.S. domestic source of lithium to supply the increasing and accelerating adoption of EVs and battery storage.

Piedmont’s President & CEO, Keith Phillips, joined RedChip’s Dave Gentry for an exclusive interview in April, where he discussed the company’s ideal position and major upcoming catalysts.

With results from Piedmont’s most recent exploration efforts coming in, a resource update is expected in June, which could significantly increase the company’s total resources from the current resource of 19.0 million metric tons (Mt).

Updated metallurgical results and a new scoping study are expected in July, providing additional near-term catalysts.

And by year-end, permitting should be in place and a definitive feasibility study complete, putting the company in a “shovel-ready” position entering 2020.

Piedmont plans to begin production of high-grade lithium concentrate prior to requiring an electrochemical conversion plant, a staged approach that will help defer capex and minimize dilution.

It’s estimated the company will only begin the conversion plant construction in 2022 or 2023, enabling it to use cash flow from spodumene sales to fund construction, reducing upfront capital requirements and equity dilution, and de-risking overall production ramp-up.

Analysts from Canaccord Genuity, Roth Capital, Eight Capital and Foster Stockbroking are already covering Piedmont, which trades both in the US on the NASDAQ and in Australia on the ASX.

Price targets for the stock are more than double its recent trading range.

As the company hits more major milestones in the coming months, these targets could very easily rise further.

With an estimated 13-year mine life, a current NPV of $888 million, and an estimated steady-state EBITDA forecast of more than $200 million per annum, shares remain a significant bargain under $20.

While shares are already up nearly 100% year-to-date, giving some of PLL’s earliest investors big gains on paper, in the big picture, we’re still on the ground floor.