PIÉMONT LITHIUM: Discussion and analysis by management of the financial situation and operating results. (form 10-K)

0
The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our financial statements and
related notes included elsewhere in this annual report on Form 10-K. The
following discussion contains forward-looking statements that reflect our plans,
estimates and beliefs. Our actual results could differ materially from those
discussed in the forward-looking statements. Factors that could cause or
contribute to these differences include those discussed below and elsewhere in
this annual report on Form 10-K, particularly those in the sections of this
annual report on Form 10-K entitled "Risk Factors," "Cautionary Note Regarding
Forward-Looking Statements," and "Cautionary Note Regarding Disclosure of
Mineral Properties."

Executive overview

Piedmont Lithium Inc. is an exploration stage company developing a multi-asset,
integrated lithium business contributing to the transition to a net zero carbon
world and the creation of a clean energy economy in North America. Through this
endeavor, we are focused on developing and manufacturing battery quality lithium
hydroxide for the fast-growing electric vehicle industry. The centerpiece of our
operations, our wholly-owned Carolina Lithium Project, is located in the
renowned Carolina Tin-Spodumene Belt of North Carolina. We are geographically
diversified with equity investments in strategic partnerships that own lithium
resource assets in Canada and Ghana. Collectively, these resource assets and the
location of these assets in the United States, Canada and Ghana, strategically
position us to be a large, low-cost, sustainable producer of lithium products,
serving the North American and European electric vehicle and battery supply
chains. The geology, geography and proximity of our resources, planned
production operations and customer base, should allow us to deliver a valuable
supply of high-quality, sustainably produced lithium hydroxide from spodumene
concentrate, which is preferred by most electric vehicle manufacturers. Our
diversified operations should enable us to play a pivotal role in supporting the
move toward decarbonization and the electrification of transportation and energy
storage.

Redomiciliation

Piedmont Lithium Inc. acquired all of the issued and outstanding ordinary shares
of Piedmont Australia, our Australian predecessor and a wholly-owned subsidiary,
pursuant to a Scheme of Arrangement under Australian Law, which was approved by
Piedmont Australia's shareholders on February 26, 2021 and the Federal Court of
Australia on May 5, 2021 (collectively referred to as "Redomiciliation"). As
part of the Redomiciliation, the Company changed its place of domicile from
Australia to the State of Delaware in the United States, effective May 17, 2021.

Piedmont Australia's ordinary shares were listed on the ASX, and Piedmont
Australia's ADSs, each representing 100 of Piedmont Australia's ordinary shares,
were traded on Nasdaq. Following the approval of the Redomiciliation, the
Company moved its primary listing from the ASX to Nasdaq and retained an ASX
listing via CDIs, each representing 1/100th of a share of common stock of
Piedmont Lithium Inc.

                                       32
--------------------------------------------------------------------------------
  Table of Contents
Pursuant to the Redomiciliation, holders of Piedmont Australia's ordinary shares
received one (1) CDI in Piedmont Lithium Inc. for each ordinary share held in
Piedmont Australia on the Redomiciliation record date; and holders of ADSs in
Piedmont Australia, each of which represented 100 ordinary shares of Piedmont
Australia, received one (1) share of common stock in the Company of Piedmont
Lithium Inc. for each ADS held in Piedmont Australia on the Redomiciliation
record date.

All of the issued and outstanding common shares of the Company have been retroactively adjusted in these consolidated financial statements to reflect the ratio of 100: 1 and the consolidation of the shares as if it had occurred on July 1, 2019.

Highlights 2021 and 2020

• During the second half of 2021, we entered into a strategic partnership with

Sayona for the planned future production of spodumene concentrate in Quebec,

Canada. As part of our strategic partnership, we have acquired a stake

of approximately 19% in Sayona and a 25% interest in Sayona Quebec.

In August 2021, after the closed financial year June 30, 2021, we made a

additional investment in Sayona Quebec, which facilitated the

the acquisition of substantially all of the assets of NAL. NAL’s assets include a

existing spodumene mine and spodumene mill located near

Val-d’Or, Quebec, who are currently in care and maintenance. Besides,

we have entered into a long-term supply agreement under which Sayona Quebec will supply

the greater of 50% or 113,000 metric tonnes of spodumene concentrate per year

produced from the combined operations of Sayona Quebec to NAL and Authier

    Project to Piedmont Lithium.


• In June 2021, we have entered into a strategic partnership with IRR for the

future production of spodumene concentrate in Ghana. In August 2021,

after the closed financial year June 30, 2021 and as part of our strategy

partnership, we (i) acquired a stake of around 10% in IRR,

(ii) has entered into a long-term supply agreement under which IRR will sell 50% of

spodumene concentrate produced in Ghana To Piedmont Lithium, and (iii) have

the ability to acquire a 50% stake in IRR’s lithium-based company

wallet in Ghana through expected future phased investments totaling $ 87

    million.


• In June 2021, we carried out an update of the scoping study for a

the lithium hydroxide manufacturing plant will be located in Gaston County,

North Carolina. The study highlighted a potential 20-year operation producing

30,000 metric tonnes per year of lithium hydroxide, an estimated net after-tax

present value of about $ 1.9 billion, and around 31% after tax

internal rate of return. The study looked at the conversion of lithium using Metso

Outotec’s alkaline pressure leach technology. We are currently undertaking a

    definitive feasibility study of the proposed, fully-integrated Carolina
    Lithium Project.


• In May 2021, we have completed our scheduled redomiciliation from Australia to the

United States, which included changing our main list to Nasdaq from

ASX and make ASX our secondary list. As a member of

Redomiciliation, our head office is now located at Belmont, North

    Carolina.


• In April and May 2021, we have increased our estimate of lithium mineral resources by

40% and our by-product mineral resources estimated at 40%, respectively, for

    our Carolina Lithium Project.


• During 2021 and after the closed financial year June 30, 2021, we rented the key

managerial and managerial positions, including Bruce czachor,

Executive Vice-President and Chief Legal Officer and Secretary; David

Klanecky, executive vice president and chief operating officer; Michel Blanc,

Executive Vice-President and Chief Financial Officer; Austin devaney, Vice

president of sales and marketing; Kris McVey, vice-president and Human in Chief

    Resources Officer; and Brian Risinger, Vice President of Corporate
    Communications and Investor Relations.


• In April 2021, we have teamed up Metso Outotec on the conversion of lithium hydroxide

    technology, specifically the use of alkaline pressure leaching for the
    conversion of spodumene concentrate to lithium hydroxide.


• In March 2021, we have completed a we public tender offer totaling $ 122.5

    million in gross cash proceeds.


• In March 2021, we published the results of a life cycle assessment of our

Carolina Lithium Project, which was produced by industry leader Minviro

Group. The results of our life cycle analysis showed that the

land and water footprints as well as a very competitive carbon footprint

    compared to incumbent producers in South America and China.


• In October 2020, we have completed a we public tender offer totaling $ 57.5

    million in gross cash proceeds.


• In September 2020, we entered into an agreement with an automobile manufacturer to

    supply spodumene concentrate from the Carolina Lithium Project.



                                       33
--------------------------------------------------------------------------------
  Table of Contents
COVID-19 Impact

COVID-19 was declared a pandemic by the World Health Organization on March 11,
2020. In response, we implemented generally accepted protocols to protect the
health and safety of our employees, contractors, and communities during this
pandemic, including allowing our employees to work remotely. In 2021, our
contractors had difficulties in maintaining drilling crews at full capacity and
at high utilization rates due to negative impacts from COVID-19; however, we
were able to remain on schedule for purposes of our testing and evaluation
activities. Our business was not materially impacted by the negative impacts
from COVID-19.

Outlook

The demand for electric vehicles continues to grow as many jurisdictions around
the world have legislated to shift new car fleets away from internal combustion
engines. These electric vehicles will use batteries, and the expectation is that
nearly all of these batteries will be lithium-based batteries. Our strategy is
to develop resources and processing capabilities that support the opportunity to
meet the demands of our customers across the electric vehicle supply chain. Many
of the car manufacturers have committed significant capital to expand their
electric vehicle portfolios and have targets to electrify their fleets by as
much as 100% by 2035.

The outlook for global sales of new electric vehicles (units in millions) and
the global penetration rate of new electric vehicles sold compared to total new
vehicles sold are presented in the table below:

                                 2021   2022   2023   2024   2025   2026   2027   2028   2029   2030
Sales of new electric vehicles   4.9    6.4    8.7    11.2   14.6   17.4   20.6   24.3   28.9   34.0
Penetration rate                  6%     7%     9%    11%    15%    17%    20%    23%    27%    31%


————————————————– ——————————

Source: Rho Motion EV Battery Outlook as of June 30, 2021. Note: The periods in the table above are periods of the calendar year.

Components of our operating results

Exploration and evaluation costs

Exploration and evaluation expenses include drilling and sampling costs,
technical and engineering studies, permitting costs and overhead costs
associated with the exploration and evaluation of the Carolina Lithium Project,
such as maintaining our exploration headquarters and other fees for professional
services and legal compliance. Expenditures on exploration and evaluation
incurred by us are expensed as incurred up and until the completion of a
definitive feasibility study, other than costs directly associated with
acquiring the exploration properties, which are capitalized. Costs associated
with the acquisition and maintenance of exploration rights are capitalized,
rather than expensed.

General and administrative expenses

General and administrative expenses include overhead costs, such as employee
compensation and benefits for corporate management and office staff including
accounting, legal, human resources and other support personnel, professional
fees, insurance, and costs associated with maintaining our corporate
headquarters.

Other income (expenses)

Other income (expense) primarily consists of interest expense, interest income,
and foreign exchange gains. Interest expense consists of interest incurred in
the financing of surface properties purchased for exploration and evaluation as
well as interest incurred for lease liabilities. Interest income primarily
consists of interest earned on our cash and cash equivalents. Foreign exchange
gains consist of gains earned on foreign bank accounts denominated in Australian
dollars.

Loss on investments in non-consolidated affiliates

We apply the equity method of accounting for investments when we have
significant influence but not controlling interest in the investee. The
Company's proportionate share of the net loss resulting from these investments
is reported as "Loss from equity investments in unconsolidated affiliates, net
of tax" in our consolidated statements of operations. The Company's equity
investments in unconsolidated affiliates are reported at cost and adjusted each
period, on a one quarter lag, for the Company's share of the investee's loss and
dividends paid, if any.

Results of Operations

We operate as one reportable segment. The following table summarizes our results
of operations:

Consolidated Statements           Years Ended June 30,
of Operations
                                 2021              2020                $                %

Exploration and
evaluation expenses         $   10,874,502     $   3,125,784         7,748,718         247.9 %
General and
administrative expenses          8,861,454         3,440,160         5,421,294         157.6 %
Other income (expense)            (193,266 )         686,793          (880,059 )      (128.6 %)
Loss from equity
investments in
unconsolidated
affiliates, net of tax             (64,626 )               -           (64,626 )           *
Net loss                    $  (19,993,848 )   $  (5,879,152 )     (14,114,696 )      (240.1 %)


————————————————– ——————————

* Not significant.

                                       34
--------------------------------------------------------------------------------
  Table of Contents
2021 Compared to 2020

Exploration and evaluation costs

Exploration and evaluation expenses increased $7.8 million, or 247.9%, to $10.9
million, in 2021 compared to $3.1 million in 2020. The increase in exploration
and evaluation expenses was primarily due to increased drilling, engineering,
and metallurgical testing activities associated with the Carolina Lithium
Project in North Carolina in 2021. Contract labor costs associated with drilling
activities was a primary driver of exploration and evaluation expenses.

General and administrative expenses

General and administrative expenses increased $5.4 million, or 157.6%, to $8.9
million in 2021 compared to $3.4 million in 2020. The increase in general and
administrative expenses was primarily due to increased professional fees as the
Company became subject to U.S. public company requirements as part of the
Redomiciliation. Included in the increase in professional fees were $1.4 million
of costs directly associated with the Redomiciliation. Compensation expenses
also contributed to higher general and administrative expenses due to the hiring
of key management personnel and support staff at the Company's headquarters in
Belmont, North Carolina in 2021.

Other income (expenses)

Other income (expense) decreased $0.9 million, or 128.6%, to $(0.2) million in
2021 compared to $0.7 million in 2020. The decrease in other income (expense)
was due to a gains in foreign exchange totaling $0.6 million as the U.S. dollar
outperformed the Australian dollar in 2021 compared to 2020, a decrease in
interest income, and an increase in interest expense.

Loss on investments in non-consolidated affiliates

Loss from equity investments in unconsolidated affiliates, net, was $0.1 million
in 2021 compared to zero in 2020. The loss was generated from our investment in
Sayona. The Company did not have equity investments in unconsolidated affiliates
in 2020.

Liquidity and capital resources

Sources and uses of species

As of June 30, 2021, $136.8 million, or 95.9%, of our cash balances were held in
the United States. The remaining $5.9 million, or 4.1%, of our cash balances
were held in Australia. Cash balances in Australia can be repatriated to the
United States with inconsequential tax consequences.

We are an exploration stage company and, since our inception, we have not
generated revenues. We incurred losses of $19.9 million and $5.9 million in 2021
and 2020, respectively, and have accumulated losses of $71.3 million and $51.6
million as of June 30, 2021 and 2020, respectively. We have relied on equity
financing to fund our operating and investing activities and to fund our
long-term debt payments.

Our predominant source of cash is from financing activities. In 2021 and 2020,
we raised cash through issuances of our common stock for the primary purpose of
funding working capital associated with exploration and evaluation expenses and
general and administrative expenses, purchasing of exploration and evaluation
assets, capital expenditures, and investments supporting our strategy of
becoming a producer of lithium hydroxide. We had working capital of $137.8
million and $17.0 million as of June 30, 2021 and 2020, respectively, resulting
in an increase in working capital of $120.9 million mostly attributable to an
increase in cash of $123.8 million. In addition to cash purchases of exploration
and evaluation assets, specifically surface properties and their associated
mineral rights, in North Carolina, we entered into noncash seller financed
purchases of exploration and evaluation assets in North Carolina totaling $0.7
million and $2.7 million in 2021 and 2020, respectively.

In March 2020, the CARES law was signed we law to provide economic relief to individuals and businesses facing economic hardship due to the COVID-19 pandemic. The CARES law did not have a material impact on our financial position or our consolidated operating results for the years ended. June 30, 2021 and 2020.

The following table is a condensed cash flow table provided in connection with the discussion of liquidity and capital resources:

                                                  Years Ended June 30,
                                                 2021              2020

Net cash used in operating activities       $  (16,257,254 )   $  (6,332,301 )
Net cash used in investing activities          (34,565,793 )      (3,452,254 )
Net cash provided by financing activities      174,617,607        24,718,553
Net increase in cash and cash equivalents   $  123,794,560     $  14,933,998



Cash flow from operating activities

Operating activities used $16.3 million and $6.3 million in 2021 and 2020,
respectively, resulting in an increase in cash used in operating activities of
$10.0 million during 2021. The increase in cash used in operating activities was
primarily due to an increase in net loss of $14.1 million, adjusted for noncash
items, partially offset by an increase from changes in operating assets and
liabilities in 2021 compared to 2020.

                                       35
--------------------------------------------------------------------------------
  Table of Contents
Cash Flows from Investing Activities

Investing activities used $34.6 million and $3.5 million in 2021 and 2020,
respectively, resulting in an increase in cash used in investing activities of
$31.1 million during 2021. The increase in cash used in investing activities was
mainly due to our equity investments in Sayona and Sayona Quebec totaling $16.4
million, including transaction costs, and an increase in cash purchases of
exploration and evaluation assets for the Carolina Lithium Project of $15.4
million in 2021 compared to 2020.

Cash flow from financing activities

Financing activities provided $174.6 million and $24.7 million in 2021 and 2020,
respectively, resulting in an increase in cash provided by financing activities
of $149.9 million during 2021. The increase in cash provided by financing
activities was mainly due to an increase in net issuances of our common stock of
$149.9 million in 2021 compared to 2020. In 2021, we raised $175.0 million in
cash through issuances of our common stock, net of issuance costs.

Liquidity outlook

As of June 30, 2021, we had available cash balances totaling $142.7 million.
Currently, we do not maintain a credit facility or have debt from financial
institutions. Since inception, we have predominately relied on equity financing
to fund our operations, land acquisitions, capital expenditures and equity
investments.

Our cash flow forecast for 2022:

• includes funding for non-discretionary and discretionary spending mainly

related to: (i) exploration and evaluation costs of the Carolina Lithium mine

Project in United States and for lithium projects in Canada and Ghana, (ii)

general and administrative expenses, including general expenses, (iii) growth

and (iv) the costs of acquiring exploration and evaluation assets,

specifically surface properties and associated mineral rights, in the north

Carolina who are under contract as of June 30, 2021.

From June 30, 2021, we entered into certain acquisition contracts for the

the purchase of exploration and evaluation assets in North Carolina, as indicated

above, totaling $ 37.0 million, which we plan to close and finance $ 12.6

million in the first half of 2022, $ 5.2 million in the second half of 2022,

$ 10.5 million in 2023 and $ 8.7 million in 2024. These amounts do not include

closing costs such as attorney fees, taxes and commissions. For the vast

majority of these contracts, we may terminate, at our option, with

   minimis cancellation costs;


• does not include the financing of cash expenses for: (i) the additional acquisition

the costs of exploration and evaluation assets that are not yet under contract at

June 30, 2021, (ii) the costs of constructing a mine, a concentration plant or

chemical plant on one of our properties, owned or currently under

contracts financed by the seller in North Carolina, or through our investments in

Canada Where Ghana; or (iii) additional equity investments in new

    ventures or to increase our ownership within our current investments;



  • does not include cash from equity and/or debt financings; and


• does not include cash generated from the generation of operating income. We dont do

plan to start development or production on one of our properties related to

the Carolina Lithium Project or to receive distributions from our investments

in lithium projects in Canada Where Ghana in 2022.



We believe our current cash balances are sufficient to fund cash requirements
and debt payments for the next 12 months. Additionally, we believe our current
cash balances are sufficient to fund our cash forecast for fiscal year 2022,
which includes discretionary and non-discretionary expenditures, as discussed
above. In the event costs were to exceed our forecast, we will reduce or
eliminate current and/or forecasted discretionary spending. If further
reductions are required, we will reduce certain non-discretionary expenditures.

We will incur significant cash expenditures for the construction of the proposed
mine, concentrator plant and chemical plant at our proposed Carolina Lithium
Project in North Carolina. We currently expect construction of the Carolina
Lithium Project to cost approximately $840 million. Additionally, we will incur
significant cash expenditures for construction costs associated with our equity
investments in lithium projects in Canada and Ghana with Sayona and IRR,
respectively. We will require equity and/or debt financings in order to fund
future planned construction costs for these projects.

On August 31, 2021, we submitted a draft loan application to the Loan Programs
Office of the U.S. Department of Energy for potential funding of construction
costs for our proposed Carolina Lithium Project's concentrator plant and
chemical plant. We cannot be certain that our loan application will be approved
or will have terms acceptable to us.

Historically, we have been successful in raising cash through equity financing
and obtaining land through seller financed debt; however, no assurances can be
given that additional financing will be available in amounts sufficient to meet
our needs or on terms that are acceptable to us. If we issue additional shares
of our common stock, it would result in dilution to our existing shareholders.
Stock price volatility, uncertain economic conditions, negative impacts from the
COVID-19 pandemic, commodity price volatility for spodumene and lithium
hydroxide, and other risks (see Risk Factors in this Form 10-K) could
significantly impact our ability to raise funds through equity and debt
financings.

Contractual obligations and other commitments

The following table summarizes our contractual obligations at June 30, 2021
which we believe will affect cash flow over the next five years and beyond:

                                                   Less than
                                     Total          1 year         1-3 years       3-5 years       Thereafter
Contractual obligations
Loans and borrowings              $ 2,311,546     $ 1,085,142     $ 1,186,469     $    39,935     $           -
Lease liabilities                     140,435         140,435               -               -                 -
                                  $ 2,451,981     $ 1,225,577     $ 1,186,469     $    39,935     $           -



                                       36
--------------------------------------------------------------------------------
  Table of Contents
Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources that is material to investors.

Critical accounting policies and estimates

Our management's discussion and analysis of our financial condition and results
of operations is based on our consolidated financial statements, which have been
prepared in accordance with generally accepted accounting principles in the
United States ("GAAP"). The preparation of these consolidated financial
statements requires us to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities as of the date of the consolidated financial statements,
as well as the reported expenses incurred during the reporting periods. Our
estimates are based on our historical experience and on various other factors
that we believe are reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying value of assets and
liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or conditions. We
believe that the accounting policies discussed below are critical to
understanding our historical and future performance, as these policies relate to
the more significant areas involving management's judgments and estimates.

While our significant accounting policies are described in the notes to our
consolidated financial statements included elsewhere in this annual report on
Form 10-K, we believe that the following critical accounting policy is the most
important to understanding and evaluating our reported financial results.

Stock-based compensation

Equity-settled, share-based payments are provided to officers, employees,
consultants and other advisors. These share-based payments are measured at the
fair value of the equity instrument at the grant date. Fair value of share
options is determined using the Black-Scholes option pricing model, taking into
account the terms and conditions upon which the instruments were granted, and
are disclosed in Note 11 to the audited consolidated financial statements
appearing elsewhere in this annual report on Form 10-K. We record stock-based
compensation expense within both exploration and evaluation expenses and general
and administrative expenses in the Statements of Operations. Costs are allocated
among those receiving the benefit based upon job function. There are certain
employees who serve both functions, and therefore, their stock-based
compensation expense is split between both financial statement lines in the
consolidated statements of operations.

Estimating fair value for share-based payment transactions requires
determination of the most appropriate valuation model, which depends on the
terms and conditions of the grant. This estimate also requires determination of
the most appropriate inputs to the valuation model including the expected life
of the share option, volatility, dividend yield and risk-free interest rate and
making assumptions about them.

Changes to this input would affect the resulting valuation for each equity instrument valued in this way and, therefore, the value of each grant would vary differently depending on the change in the data. respective input.

                                       37

————————————————– ——————————

  Table of Contents
The fair value determined at the grant date is expensed on a straight-line basis
over the vesting period, based on our estimate of equity instruments that will
eventually vest. At each reporting date, we revise our estimate of the number of
equity instruments expected to vest. The impact of the revision of the original
estimates, if any, is recognized in profit or loss over the remaining vesting
period, with a corresponding adjustment to the share-based payments reserve.

© Edgar online, source Previews


Source link

Share.

About Author

Comments are closed.