The Piedmont Lithium Inc (ASX: PLL) share price is under pressure on Friday despite announcing its expansion into Africa.
At the time of writing, the lithium explorer's shares are down 1% to $1.03.
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Why is the Piedmont Lithium share price under pressure?
This morning Piedmont Lithium announced definitive agreements to establish a strategic partnership with IronRidge Resources (IRR) through the purchase of an equity stake in the London listed lithium explorer.
According to the release, Piedmont Lithium will invest approximately $15 million (10.8 million pounds) to acquire a 9.47% equity interest in IRR. In addition to this, Piedmont Lithium has the opportunity to earn a 50% stake in IRR Ghana business.
The release notes that IRR Ghana has an impressive portfolio of spodumene prospects, anchored by the highly promising Ewoyaa Project. This project has a current mineral resource of 14.5Mt @ 1.31% lithium oxide with vast exploration potential. Management believes it has the potential to be a large, low-cost spodumene concentrate (SC6) producer.
To earn a 50% interest in the IRR Ghana business, Piedmont Lithium will need to invest $17 million to fund ongoing exploration and a definitive feasibility study over the next 24 months and then a further $70 million in 2023-2025 to fund the construction of the Ewoyaa Project.
After which, the two parties have entered into a binding SC6 supply agreement, conditioned on Piedmont Lithium completing its earn-in obligations, pursuant to which IRR will supply it with 50% of IRR Ghana's planned SC6 production (currently estimated to be 147,500 tonnes per year) at market prices on a life-of-mine basis.
While the company has a strong balance sheet, investors may be concerned that this development will require another capital raising in the not so distant future.
Management commentary
Piedmont Lithium's President and Chief Executive Officer, Keith D. Phillips, commented: "We are very pleased to announce a partnership with IronRidge Resources to jointly develop their outstanding spodumene project portfolio in Ghana. We consider IRR's Ewoyaa Project to be among the world's most promising spodumene projects."
"The high-grade mineral resource is currently modest in scale but offers substantial exploration potential, and the project is very well-located, being only 70 miles from a major port. Ewoyaa builds on Piedmont's strategic commitment to be a large-scale and low-cost producer of lithium hydroxide from spodumene concentrate sourced from diverse sustainable resources in favorable jurisdictions," he added.
Despite today's weakness, the Piedmont Lithium share price is still up almost 180% in 2021.
