Wanted to discuss strategy/funding on Ewoyaa as 99% of the threads are concerned about NAL.
As it stands Piedmont, in funding roughly $115m USD CAPEX for the mine, will have a fully diluted share in the project at 40.5%
Piedmont also own 5% of Atlantic, they have sold down their stake in a block trade in the early part of the year to Assore, and have roughly $6m USD in liquid value here that I would assume gains more benefit as cash on their balance sheet. I think these shares will be sold in the next 6 months with continued suppresed Li pricing, in order to relieve pressure on corporate whom have a sustained cash burn. They will then have no invested interest in the Atlantic the entity.
In terms of Ewoyaa the project, Keith Phillips has stated numerous times now he is fully behind the project, but he has also alluded to in the most recently quarterly he believes post ratification at this pricing, Ewoyaa will not pass FID. In other words he wants to push back the mine build and won't commit to funding until NAL and the broarder Li market, is in a better position.
Now the fine print on the project and when FID is required and whether there is an FID clause that allows Piedmont to reject as they see fit is not readily available, but as for announcement on 31 Aug 2021 "If the DFS criteria of Stage 2 is achieved and Piedmont elects by mutual agreement not to proceed to Stage 3 (CAPEX Funding), Piedmont will forfeit its Stage 2 interest (22.5%).
You can take a very open interpretation to the term mutual agreement.
Looking from a numbers perspective if Atlantic, MIIF and GoG want to push ahead on a determined date given they own 50%+ of the mine that may force Piedmont's hand to begin funding the first $70m USD of mine build per agreed terms or forfeit their earn in agreement or negotiate a cut price for their "earned" interest to date.
Piedmont do not have the balance sheet to operate NAL and fund Ewoyaa near term in cash as was planned. Their 50% offtake agreement (180ktpa spod) with Atlantic for Ewoyaa has no perceived value as it is determined at market pricing. I know Keith has mentioned to leverage this offtake to bring in funding for mine build and capture any value, in their project ownership. The only alternative I see to this aside from selling their stake at a cut price deal internally is a combination of cash, debt funding and capital raising.
My recommendation is post ratification when the project has been significantly derisked and approaching FID they should sell their now slightly diluted 22.5% back into the JV and see if they can pocket $80m-$120m USD for their interest. The government of Ghana wants a higher percentage and that would be a genuine opportunity to attract a premium. Put your money where your mouth is..
In doing so, Piedmont pockets somewhere between $86m-$130m USD dependent on the value of Atlantic shares they sell and the agreed price for their project stake. Given their original investment and other extenuating factors I believe that would be more than fair if Keith does not see the upside in Ewoyaa in improving sentiment and he cannot hold off FID any longer. It also stops the requirement to spending the equivalent of $115m USD to get Ewoyaa into operation with no guarantee of positive cash flow with suppresed pricing seems a much better ploy.
Add in circa $55m USD cash on the books and this positions Piedmont really strongly to focus on developing their Kings Mountain project and continue to operate NAL without the pressure of finding cash to wait out this extremely low pricing environment.
Keen to hear some thoughts on this.
PLL Price at posting:
11.0¢ Sentiment: None Disclosure: Not Held
(20min delay)