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Piedmont Lithium CEO on Tesla partnership, China, and EV battery market

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Piedmont Lithium CEO Keith Phillips joins Yahoo Finance Live to discuss its role in the growing electric vehicle and battery storage markets in the United States, as well as its partnership with Tesla.

Video Transcript

MYLES UDLAND: But as we mentioned earlier in the program, also a very busy week for corporate earnings. Tesla is among the companies set to report their quarterly results. And as we've seen this huge rush of excitement and capital flow into the self-driving car space, into the electric vehicle space, there hasn't really been a lot of talk about some of the raw materials, some of the actual things that come out of the Earth that are needed to make these products go.

One company that is working on that is Piedmont Lithium, and the company's CEO Keith Phillips joins us now. So Keith, maybe let's take a step back for our viewers and talk a bit about where lithium and what you guys are hoping to get mining down there in North Carolina fits into this kind of modern automotive stack, as we imagine it might be, and certainly, as Tesla and other companies believe it will be in the years ahead.

KEITH PHILLIPS: Well, it's a great question. And thanks for having me on. You know, the electric vehicle business is booming. You can't have an electric vehicle without a battery. You can't have a battery without lithium. 85% of the world's lithium today comes from China. Now that's a big issue for western OEMs and the battery companies that supply them. Just from a supply chain perspective, it's troubling.

So, we're developing a very large lithium hydroxide project in North Carolina. And interestingly, all of the world's lithium came from North Carolina from the 1950s to the 1980s. There were two big mines that were depleted. There's no longer any upstream activity, really, in North Carolina. But we intend to build a very large business there and supply people like Tesla and other people in that supply chain. And we think it's a great opportunity for us and our shareholders and, actually, the whole EV business.

BRIAN SOZZI: Keith, how big an issue is China? Do you fear that they will start holding back lithium supply? Are we there yet?

KEITH PHILLIPS: I don't think we're there yet. You know, there are a number of players in China. They're growing quickly as well. The issue the Chinese have is they don't control their own raw materials. So, 85% of the lithium raw material comes from Australia, Chile, and Argentina. Virtually, all that material shipped into China to be converted-- they're kind of ahead of the curve on that-- and then, shipped around the world. It's used domestically, but it's also used in vehicles everywhere else in the world right now.

So, there are a number of players. And I think what's clear in our conversations with customers from people like Tesla, other US and German OEMs, et cetera, is really a desire to localize supply chains for all kinds of reasons. Partly it's the reliance on one country, China. That partly is the reality that China is very far away from the US and European automotive markets, which are big and booming on the EV side.

And car companies like to have supply be local, regardless of what the material is. So it's a big advantage for us. We're located 30 miles west of Charlotte. We're located within an easy drive of over a dozen automotive plants, a couple of big battery plants being built, more to come. And it's just an ideal location for us.

JULIE HYMAN: So, Keith, it's Julie here. First of all, where are you guys in the timeline of actually starting production there in the mine? I know you have some permits that you recently got put through. And then, what is the cost of your production going to be versus some of your international competitors?

KEITH PHILLIPS: Thanks, Julie. Yeah, good questions, and thanks for the comment about the permit. We did receive our last federal permit back in November. We received the federal permit for our concentrated operations in 2019, the federal permit for our chemical operations last year. We were the first green field project permitted federally in the US. So that's behind us, so that's great.

2021 is a year of execution. So we expect to be shovel ready in the second half of this year. Definitive feasibility completed, local permits received-- that's underway. Offtake agreements-- we've got one with Tesla now, but with others secured, we will be in a position to kind of focus on financing in the middle of the year and construction at the end of 20-- the second half of 2021. We'll be producing concentrate by the second half of 2022. That's the spodumene concentrate, the mineral concentrate. And we'll be producing lithium chemicals by the end of 2023.

So that's a timeline. So in mining terms, that's really warp speed. We've moved-- we're a four-year-old company. We've been moving very quickly. It's one of the key issues, though, is it takes a long time for the upstream operations to come online. It takes longer to build these businesses than it does to build, say, an automotive plant or even a battery plant.

In terms of cost, it's also a great question. We think we'll be the lowest cost producer in the world. So, 85% of the material comes from China today. The Chinese are low cost from a labor perspective, but their power costs are higher than ours. And the raw material input costs are far higher because they're importing-- they're buying raw material on the market, importing it all the way to China. We're going to manufacture our own concentrate.

And being 30 miles west of Charlotte, we have wonderful infrastructure, low power costs, a great built-in labor force that we also can monetize some of the byproduct minerals. So in our ore body, we have spodumene, which is the mineral that contains lithium. We also have quartz, feldspar, and mica, which are important in businesses like the solar glass business, the quartz countertop business, automotive paint businesses.

So those are minerals we'll recover and sell as well, which will really improve our economics and also minimize waste from the project. So it ends up being a very clean project and we think, again, the lowest cost producer in the world.

JULIE HYMAN: And Keith, as well, you're probably aware President Biden is expected to sign an executive order that is pushing for more sort of buy American initiatives, particularly when it comes to federal sourcing. Now I don't know if that affects you all because as I'm not aware of any federal making of lithium batteries and vehicles at this point, but I'm wondering if that is somehow going to give you guys a boost.

KEITH PHILLIPS: Yeah, we're not sure what's going to come out of Washington. The soundings are positive, I think. You know, we're a member of a number of industry associations. One is called ZETA, Zero Emissions Transportation Association. Tesla, Uber, Piedmont, we're founding members among others. And ZETA has made some strong recommendations to the incoming administration on a number of fronts, from raw material sourcing to development of charging infrastructure, et cetera.

So I expect to see a number of initiatives that we think will all be positive for electric vehicle demand in the United States and possibly requirements related to local supply of the raw materials that are so critical. So there are a number of initiatives that could be positive for us. You know, we're engaged in some discussion, and but we'll wait and see. But we're very, very positive about the regulatory backdrop.

BRIAN SOZZI: Keith, you mentioned your deal with Tesla. If I have it right, it is a five-year binding deal. And you'll start shipping Tesla lithium in 2022, in the 2022, 2023 time frame. You know, just based on your discussions with Tesla, how big a market mover will Tesla will be in the lithium market? And does that-- what they're doing, does that-- is that a game changer for the entire industry, whether it's cell phones-- you name it.

KEITH PHILLIPS: Sorry, that-- I'm not sure-- we dropped you. Can you hear me?

BRIAN SOZZI: Keith, can you-- you got us, right?

KEITH PHILLIPS: Yeah, I can hear you. Yeah. Listen, Tesla is a game changer, full stop, in every level. They're the leader of the electric vehicle business globally. They've essentially created an industry. It's a transformational industry. It's a very large industry that's been transformed, really, with the leadership of one company. So we're very proud to be associated with them. We have a good relationship. We do expect to be a large supplier to them.

Every other car company in the world is coming hard into the electric vehicle business. They have no choice. They're all working hard at it, whether it's the large Americans, the Europeans, the Japanese and Koreans, et cetera, certainly the Chinese startups. There are all the startups you've seen in the US capital market that have gone public via SPACs, largely the trucking business, et cetera, and buses. All very exciting, all need the same thing. They all need batteries. They need lithium.

And we think the US market, which has been a laggard-- so China was the leader in electrification of the vehicle business. I mean, on the one hand, Tesla was the leader. And the US is still a technology leader. But China's market grew the most quickly. Europe doubled in EVCOs last year. It more than doubled. So Europe has become a very large market. It's now number one in the world for electric vehicles.

But I think the US market will be the biggest electric vehicle market in the world in a matter of time. Certainly, in the next several years. And we're excited to participate in that. Tesla will be a leader undoubtedly. They make-- I'm a Tesla owner, Model 3. They make great cars. And they're very economical, frankly. And the other car companies are going to follow their lead. And that's going to be great for, I think, the environment. It's going to be great for the economy. It's going to be great for material suppliers like Piedmont, who they need to rely on.

MYLES UDLAND: All right, really interesting stuff. Keith Phillips is the CEO of Piedmont Lithium. Keith, really appreciate you taking the time to talk with us this morning.

KEITH PHILLIPS: Thanks a lot, guys. Really appreciate it.