Piedmont Lithium (NASDAQ:PLL) is revving up its engines and kicking off the week. The Australian mining company is seeing a massive move Monday, thanks to some big news from Tesla (NASDAQ:TSLA). What exactly is causing the rally in PLL stock?
To start answering that question, you must understand exactly what Piedmont Lithium is all about. The company calls Australia its home, but it focuses on mineral projects within the United States, including a 100%-owned lithium project in North Carolina. Importantly, Piedmont Lithium is hoping to make big waves in the electric vehicle and battery storage worlds. These industries need lithium to keep scaling, and Piedmont wants to supply it.
The rally in PLL stock this morning comes as Piedmont buckles down on its goals.
Likely thanks to its expertise in lithium mining, Tesla (NASDAQ:TSLA) is very interested in Piedmont. The two companies just signed a five-year supply contract, and investors love the news. Piedmont gets a huge business partner, and Tesla gets the lithium it needs to keep growing. Talk about a win-win situation. Unsurprisingly, PLL stock is up more than 200% in pre-market trading. TSLA stock is up almost 5%.
Investors should also note some of the specificities of the deal. Piedmont will start deliveries between July 2022 and July 2023, and it will supply one-third of the lithium ore Tesla needs. The electric car leader currently requires 16,000 tons per year of spodumene concentrate, from which it can extract the lithium for its batteries. In other words, this deal is really big. Importantly, Tesla and Piedmont have the option to extend the supply contract for another five years.
Why PLL Stock Is Rallying Today
There are two big factors for investors to note here today. The first is that Tesla is really getting serious about batteries. Just last week, its Battery Day event captivated the world. There, CEO Elon Musk shared that the company gained rights to 10,000 acres of land for lithium acquisition. He also announced a slew of innovations that will lengthen the range, lower costs and reduce how many batteries Tesla actually needs to manufacture.
Despite this, it is clear that Tesla simply needs more lithium and more batteries right now. Hours before Battery Day, Musk shared that it was incredibly difficult to scale production. Tesla is working to innovate in its own factories and increasing supply relationships with Panasonic (OTCMKTS:PCRFY) and LG Chem. Piedmont Lithium is therefore another key to its success — and PLL stock should benefit.
Plus, the novel coronavirus has made electric vehicle companies like Tesla even more popular. Experts anticipate increasing demand and consumer adoption, necessitating innovation here. If Piedmont Lithium can deliver on the deal and support Tesla, Wall Street should have its back.
On the date of publication, Sarah Smith did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Sarah Smith is a Web Content Producer for InvestorPlace.com.