North Carolina regulators reportedly have approved a state mining permit for Tesla supplier Piedmont Lithium to develop one of the largest US sources of the key electric vehicle battery metal, although key financing and local regulatory challenges remain.

According to Reuters, the approval from the North Carolina Department of Environmental Quality, which is conditional on the posting of a US$1m reclamation bond, removes a major hurdle to Piedmont’s plans to tap a large lithium deposit just outside Charlotte.

The state has never turned down a mining permit application, the report noted.

The go ahead for the 500 feet deep mine came despite widespread opposition from neighbours worried about water, noise pollution and other potential problems, Reuters said.

Years long opposition to the project, which would become one of the few lithium-producing sites in the US, illustrated broadening tension in the country, as resistance to living near a mine clashes with the potential of EVs to mitigate climate change, the report said.

Reuters said Piedmont must still obtain a local zoning variance and financing for the project, estimated to cost more than $1bn. The company has applied for US Department of Energy loans via a programme through which rivals Ioneer and Lithium Americas have already obtained financing.

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“We plan to develop Carolina Lithium as one of the lowest cost, most sustainable lithium hydroxide operations in the world,” Reuters quoted Piedmont CEO Keith Phillips as saying.

This project, at 680 megawatts, will be able to power about 680,000 homes for four hours, the report said.

Reuters noted Piedmont agreed to a deal with Tesla last year to supply spodumene concentrate, a key battery raw material, to the automaker to the end of 2025, with an option to renew it for another three years.

Reuters said Piedmont, which also is working on lithium projects in Tennessee, Ghana and Quebec, must still obtain state air quality and wastewater permits, both of which are routine for mining projects in the state.

Low lithium prices may hobble Piedmont’s financing attempts, analysts told Reuters.

“Finding external capital for a new lithium project could prove difficult at current lithium prices, though it will help that Carolina Lithium is very low on the cost curve,” brokerage TD Cowen said on Monday.

Meanwhile Albemarle, the world’s biggest lithium miner, is hiring staff and buying land in a neighbouring North Carolina county amid plans to re-open a mothballed spodumene lithium mine that would compete directly with Piedmont, Reuters added.