Column: Electric dreams turn into a nightmare for battery metals
A sector that was once racing to build new supply has been closing mines and deferring projects as low prices bite into the cost curve.
Australia’s Sayona Mining (ASX: SYA) is buying US-based Piedmont Lithium (ASX, NASDAQ: PLL) in an all-stock deal that will consolidate their Canadian operations and boost the merged firm’s exposure to the North American electric vehicle (EV) sector, the companies said.
The deal would create the largest producer of hard-rock lithium in North America, the companies said. They noted the business combination would also create opportunities for further growth, helping to cut operating costs and make the sale and shipping of lithium easier.
The tie-up brings together the two owners of the North American Lithium (NAL) project in Quebec’s Abitibi region. This would allow the parties set up a more streamlined and robust lithium business that is well placed to grow through cycles, they said.
As part of the deal, Sayona will become the parent company of the newly formed lithium firm. The transaction, structured as an all-share deal, represents a 6% premium to Piedmont’s closing share price on Monday.
After raising capital separately by Piedmont and Sayona, the combined lithium miner will have an estimated pro-forma market capitalization of $623 million, with shareholders from both companies holding roughly equal stakes.
The tie-up brings together the two owners of the North American Lithium (NAL) project in Quebec’s remote Abitibi region.
The new lithium miner will be based in Australia, with a primary listing on the country’s stock exchange and a secondary listing of American depositary shares on the Nasdaq.
“This merger marks a transformative step for Sayona and Piedmont, creating a leading North American lithium producer with the scale and capabilities to meet the growing demand for lithium products,” Sayona chief executive Lucas Dow, who will lead the combined business, said in the statement.
Piedmont Lithium CEO Keith Phillips will become a strategic adviser to the combined group for a transition period of up to six months.
NAL, the 75%-25% joint venture between Sayona and Piedmont in Quebec, has struggled since shipping its first spodumene concentrate in mid-2023. This year it conducted a cost review and laid off staff to cut costs. It aims to produce 226,000 tonnes of spodumene concentrate annually, with half of the output originally to be sold to Piedmont.
Despite operating at a loss in the September quarter, Sayona noted that merging the entity could simplify the acceptance of government or customer support if needed.
Piedmont, which has supply agreements with several customers, including Tesla and South Korea’s LG Chem, is also advancing a project in North Carolina and exploring spodumene assets in Ghana with Australian-listed Atlantic Lithium. Sayona holds additional lithium assets in Western Australia.
This merger is the latest in a series of consolidations within the lithium sector, especially visible in the past year in the Australian market, as companies adapt to market challenges.
Despite robust demand forecasts, rapid supply growth has outpaced expectations, and EV adoption has progressed more slowly than anticipated.
Most analysts are optimistic, agreeing the sector is set for rapid growth as the world transitions to low-carbon energy. The International Energy Agency projects that meeting the Paris climate agreement goals could increase lithium demand eight-fold by 2040.
The world’s second largest miner Rio Tinto (ASX, LON, NYSE: RIO) recently demonstrated its confidence in the future of the essential battery metal with the $6.7 billion acquisition of Arcadium Lithium (ASX: LTM)(NYSE: ALTM). The US-based company was the product of a merger itself — it was created in January from the combination of Philadelphia-based Livent and Australia’s Allkem.
Sayona and Piedmont Lithium directors have unanimously approved the deal, the companies said, adding they expect to complete it in the first half of next year.
