Tesla To Secure Lithium For Its Gigafactory From Mexico

Tesla To Secure Lithium For Its Gigafactory From Mexico
Blomst / Pixabay

Tesla Motors is interested in buying lithium compound from a mining site in Mexico and has reportedly entered into a deal with two mining companies: Bacanora Minerals Ltd. and Rare Earth Minerals. Since the mine is not functional yet, the companies are required to raise funds for the construction of a mine and processing facilities in two years’ time.

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Tesla may provide funding for the site

Both firms project that 35,000 tons of lithium compound (namely, lithium hydroxide and lithium carbonate) will be supplied per year once the mine is up and running. Eventually, the output will expand to 50,000 tons per year, according to the supply contract published by Bacanora.

Once the mine becomes operational, Tesla will purchase a minimum amount of lithium hydroxide from Bacanora Minerals and Rare Earth Minerals over five years. This agreement could be extended after the agreed-upon period. The mining companies, in exchange, offer their mined materials to Tesla at rates below market prices, according to a report in The Wall Street Journal.

The two mining companies, together called the Sonora Lithium Project Partners, will need to secure financing for this deal as is stated in Bacanora’s supply contract. Tesla is allowed to contribute to the funding. Initially, the two companies estimated that they will need $114 million for building a lithium mine on the site. But a reassessment of this amount is needed keeping in mind the size of the demand from Tesla.

Alternative cheaper sources available

The lithium mined from the Sonora Lithium Project will be transported to Tesla’s so-called gigafactory, which is being built in partnership with Panasonic and is located outside of Reno, Nev. By the next year, the first phase of Tesla’s factory will be completed, as reported by The Wall Street Journal.

Researchers at the University of Wyoming have found an enormous amount of lithium at Rock Springs Uplift, a geological feature in southwest Wyoming, reported TreeHugger. Initial tests indicate that 228,000 tons of lithium could be obtained from the lithium-rich brine, and it would be enough to meet the annual demand in the U.S. The lithium discovered is also double the amount available at Silver Peak in Nevada, which is the biggest domestic lithium producer presently.

The lithium mined from this site can be processed at lower costs than those from other locations, and this has left the researchers excited. It also presents a good opportunity for Tesla to get its raw material at a cheap cost.

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Aman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at amanjain@valuewalk.com
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