US Lithium Industry Gets A Win As Piedmont Saga Advances, But Permitting Remains A Headwind

One of the largest U.S. lithium projects recently cleared a key permitting milestone after lengthy delays. But it’s just one step in a nation where mine permitting is a key chokepoint for the Biden administration’s ambitions to ramp up domestic production of metals crucial to the energy transition.

North Carolina-based Piedmont Lithium (NASDAQ:PLL) recently received a mining permit from the state for its lithium mining, concentrating and refining operation.

The project has faced at least three years of local opposition over concerns that it could pollute drinking water.

"Although this is largely company-specific news, any good news on permitting in (the) U.S. is good for domestic lithium production in general," Simon Clarke, CEO of American Lithium Corp. (NASDAQ:AMLI), told Benzinga.

The U.S. has earmarked billions of dollars to build up a battery supply chain that isn’t dominated by China. Tax credits are available for companies that build battery cells or modules domestically, as well as for companies that mine battery metals.

But mines take a long time to develop. The permitting process eats up a large portion of the time. The National Mining Association blames what it deems an inefficient system in the U.S. that takes an average of seven and 10 years.

That compares to an average of just two years in Canada and Australia, nations with similar environmental protections in place. The White House and Congress are talking about mining reform on the federal level, but that will still leave state and local reviews for miners to negotiate.

"Although the U.S. government has provided strong financial incentives in the last couple years, the piece that does need overhaul is permitting, which is somewhat outdated and too slow especially if we want to significantly boost domestic production in the timelines needed to protect domestic industry and supply chains as part of overall energy security," Clarke said.

A Long Haul

The mining industry, including the lithium segment, is often scrutinized over pollution fears. Contamination from mining and fracking, for example, can contribute to increased levels of arsenic. North Carolina locals have raised concerns about arsenic, but Piedmont says it “will not utilize, create, or release arsenic into the groundwater.”

Piedmont's North Carolina project still needs state air quality and wastewater discharge permits. It also needs an approved rezoning request and a special use permit from Gaston County, where the company has faced hostility before.

"The process appears to have taken the usual amount of time—i.e. longer than expected," Alice Fox, senior base metals strategist at Macquarie told Benzinga.

That the North Carolina delay isn't a surprise in the industry indicates that delays are par for the course, as federal, state and local processes must be checked off before companies can begin building mines. 

In 2020, Piedmont signed a deal with Tesla (NASDAQ:TSLA) to supply the electric vehicle maker with refined lithium ore from the North Carolina plant starting by July 2023 at the latest. But Piedmont had to amend that plan, saying last year that it would supply Tesla from the miner's joint venture with Sayona Mining (OTC:SYAXF) in Quebec.

Piedmont called the new permit “a catalyst for accelerating discussions with potential funding parties, including government loan agencies and strategic partners who could provide capital, offtake and technical support.”

Also Read: Lithium Market May Have Turned A Corner, But Don’t Expect 2022-Style Rally

‘Do It Right’

Piedmont hasn’t been the only lithium miner to face permitting delays. Lithium Americas (NYSE:LAC) faced years of permitting work and legal challenges before it could begin construction last year on its Thacker Pass lithium project in Nevada.

The resistance is part of a a broader issue in the mining industry which executives have summed up as a lack of trust from the public. The historical record of the mining industry in the U.S. is littered with instances of labor and environmental abuses. While mining executives say regulations and new mining technology have solved many of these problems, at least in the United States and other developed nations, the public is often leery of these promises.

The mining industry isn't the only natural resources-based sector to face the NIMBY phenomenon, an acronym that stands for "not in my back yard."

Even solar and wind farms, despite their clear link to reducing carbon emissions as well as contributions to local coffers, have been part of that push and pull, Samuel Horn, senior investment analyst with Polaris Capital Management, told Benzinga.

Opponents want to "keep grinding" mining projects down, Tim Crowley, vice president of government and extremal affairs with Lithium Americas, told Benzinga.

He doesn't expect that the state-level Piedmont decision in North Carolina will change much in the big scheme of things when it comes to mine permitting in the United States. He expects new mining projects will be challenged and will need to be legally defensible to proceed.

"The goal with permitting is to do it right and make sure it will withstand judicial review because nearly all big projects end up in court," Crowley said. "So, it's really impossible to cut corners with permitting even if there's a societal desire to move fast because the permitters and permittees will inevitably have to defend the work that went into the permit in court."

To be sure, the main short-term ramifications of the Piedmont decision are largely company-specific. But some see change on the way.

"The geopolitical and regulatory environments, and the desire to diversify from the Chinese dominance of the lithium and other critical minerals markets, will increasingly influence lithium market dynamics over the next decade," Andrew Lackner, a managing director with Energy Innovation Capital, told Benzinga. His company is a partner in EIC Rose Rock, a venture capital fund invested in Element3, a company that extracts lithium from oil and gas wastewater.

"The Piedmont Lithium permit approval demonstrates growing recognition that we need to be able to source critical minerals in America rather than rely on external sources, given current geopolitical tensions," Lackner added.

Now Read: Biden Plan To Reportedly Block Alaska Mine Access Draws Industry Ire: ‘Frankly, I Am Disgusted’

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Image: Midjourney