What happened

Shares of lithium mining start-up Piedmont Lithium (NASDAQ:PLL) roared ahead in Monday trading to close the day up 14.8%. If you own shares of Piedmont, you can thank the friendly analysts at B. Riley Securities for your gains.

Thank B. Riley, that is...and Tesla (NASDAQ:TSLA), too.

Arrow angles up on a green stock chart.

Image source: Getty Images.

So what

Riley initiated coverage of Piedmont Lithium stock with a buy rating this morning, you see, and a $66 price target on the now-$55 stock. One reason the analyst likes Piedmont, notes TheFly.com, is because of the lithium supply agreement that the company struck with Tesla last summer. Under that agreement, Piedmont promised to supply Tesla with as much as 160,000 tons per year of the metal beginning sometime between July 2022 and July 2023, and to keep on supplying Tesla's lithium needs for between five and 10 years.

Needless to say, if you're a lithium miner and you want to lock in a customer to buy your lithium, Tesla is probably at the top of your list. But Riley also argues that Piedmont's Kings Mountain, N.C.-based lithium hydroxide conversion operations give the company cost advantages over other lithium suppliers, especially given the company's focus on supplying North American battery makers.

Now what

And that may turn out to be the case. Before investors get too excited by Riley's comments today or by the stock-price spike they sparked, here are a couple of items worth considering:

First, Piedmont hasn't actually begun producing lithium at commercial scale. Until it does begin producing, it's hard to say with any certainty just how big any "cost advantages" that the company might have, actually are. And second, Piedmont's supply deal with Tesla is conditional upon the company being able to start deliveries to the car company by July 2022.

Granted, that deadline is still a good 18 months away, giving Piedmont a fair amount of breathing room. But if it does fail to meet Tesla's timeline, it probably won't matter how many cost advantages Piedmont has. This is a risk investors should not discount.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.