Tesla Inc. is likely to be forced into paying high market
prices for the lithium needed to prodcue lithium-ion (Li-ion)
batteries at its Reno, Nevada-based Gigafactory in the US for
the facility’s initial years of operation, the
UK’s Financial Times (FT) has
Neither of the companies the electric vehicle (EV)
manufacturer has signed up to provide lithium hydroxide supply
deals is due to produce substantial amounts of the material
before 2020. As a result, Tesla could be left short as it looks
to bring the Gigafactory online by the end of 2016.
"The current strategy seems to be no direct investment but
leveraging the Tesla name by signing 'contingent’
contracts at unachievably low prices with junior mining
companies who have never produced lithium chemicals," Joe
Lowry, founder of consultancy, Global Lithium, told the
"The most likely outcome is Tesla will pay high market
prices for lithium through at least the end of the decade," he
In August, Tesla signed its first lithium supply deal with
UK and Canada-listed Bacanora Minerals Ltd, which is in the
process of developing the Sonora project in Mexico. The
announcement caused uproar among Nevada politicians who had
hoped Tesla would use a local supplier, given the $1.3bn in tax
breaks it had been provided to locate the plant in Reno.
Bacanora hopes to complete a prefeasibility study (PFS) at
Sonora in Q1 2016.
A further deal was signed in September with Canadian
explorer Pure Energy Minerals Ltd, which is in the process of
bringing its Clayton Valley project online, 365km away from the
Gigafactory. It aims to complete a preliminary economic
assessment (PEA) of the site in Q2 2016.
Both deals were subject to a number of conditions and were
set at prices below the market level.
The three major lithium producers – Albemarle Corp.
and FMC Corp., headquartered in the US, and SQM in Chile
– have been unwilling to supply lithium at the prices
demanded by Tesla, according to the FT.
Meanwhile, recent reports by the Chilean press have
suggested that Tesla may be looking to arrange a supply deal
with Chilean state-owned Codelco, the world’s
largest producer of copper.
According to local newspaper, Pulso, senior Tesla
executives met with Chilean government officials to propose a
cooperation arrangement with the copper miner.
Pulso reported that Codelco has been working for
some on a plan to exploit lithium reserves contained within the
salares of Maricunga and Pedernales in north-central Chile.
However, Codelco does not currently have any involvement in
lithium extraction or any of the necessary infrastructure or
expertise to pursue such a venture, meaning a partnership with
a third party operator would likely be required were the deal
A move by Codelco into the lithium industry would be in line
with the recommendations of the National Lithium Commission of
Chile, published earlier this year.
The report proposed "the creation of a state-controlled
business, dedicated to the exploitation of the salt flats,
especially lithium, which would favour a private-public
partnership business model, incorporating shared value as a