LG Chem invests $75 million in Piedmont Lithium, signs supply deal

LG Chem Ltd., South Korea’s largest chemicals maker, said on Friday it is acquiring a 6% stake in Piedmont Lithium Inc., a US mining company, for $75 million to secure a stable supply of battery minerals.

LG Chem, the parent of the world’s second-largest battery maker LG Energy Solution Ltd., has also signed a deal to receive 200,000 metric tons of spodumene concentrate (SC6), a raw battery material, from Piedmont’s North American Lithium (NAL) mine in Canada over four years from the third quarter of this year.

SC6 is a high-purity material that processes lithium ore, from which LG can extract lithium hydroxide that serves as a key material for cathodes used in electric vehicle batteries.

Piedmont will supply 50,000 tons a year of the raw material to LG Chem.

“As LG Chem has a strong commitment to US electric vehicle battery manufacturing, Piedmont looks forward to discussing additional potential cooperation with LG in North America,” Keith Phillips, chief executive of Piedmont, said in a statement.

LG said it expects to get about 30,000 tons of lithium from 200,000 tons of SC6, enough to manufacture batteries for 500,000 pure electric vehicles.

LG said it also obtained priority negotiation rights for 100,000 tons of lithium hydroxide a year produced by Piedmont in the US.

With the deal, LG Chem will become the first Korean company to secure SC6 from North America, satisfying the requirements of the US Inflation Reduction Act (IRA).

CHANGING DYNAMICS

“This agreement allows LG Chem to provide differentiated values to North American customers with products that satisfy IRA standards by preemptively securing raw materials in the US, our key market,” LG Chem Chief Executive Shin Hak-cheol said in a statement.

“We will lead the battery material market by building various partnerships, including joint metal investments with automotive OEMs and battery makers.”

Located in Quebec, NAL, 25% owned by Piedmont, is the only lithium mine in North America capable of commercial production this year.

Established in 2016, Piedmont is headquartered in North Carolina and listed on both the Nasdaq and the Australian Securities Exchange.

The company also partially owns a lithium mine developer in Cape Coast, Ghana.

Securing a stable supply of cathode materials has increasingly become a key factor for both automakers and battery manufacturers amid rising mineral costs.

Cathode, a key ingredient for rechargeable batteries, is made up of nickel, lithium and other materials, and comprises around 40% of the cost of EV batteries.

Last November, LG Chem said it is building a $3.2 billion cathode plant in Clarksville, Tennessee – its first factory for the battery component in the US.

The new factory will allow LG to proactively address the changing dynamics of the global battery material market and with legislation such as the IRA.

LG aims to increase its global battery materials business fourfold to 20 trillion won ($14.8 billion) by 2027 from an estimated 5 trillion won in 2022.

Write to Ik-Hwan Kim and Hyung-Kyu Kim at lovepen@hankyung.com

In-Soo Nam edited this article.