Analysis: Musk's tweets fuel mining industry's hopes of a buyout by Tesla

Lithium

19/04/2022 18:26

By Ernest Scheyder
    April 19 (Reuters) - Elon Musk's recent musings that high
lithium prices may force Tesla Inc  TSLA.O  to make its own
supply of the electric vehicle battery metal have fueled hopes
by some that the billionaire entrepreneur will instead opt for a
buyout of an established mining company.
    The auto giant already has supply contracts for nickel,
lithium and a range of other EV metals from suppliers across the
globe. But it needs more, and industry analysts say Tesla may
soon realize that building a mine or processing facility from
scratch is not as easy as it sounds and the automaker should
instead consider a buyout. 
    "Price of lithium has gone to insane levels! Tesla might
actually have to get into the mining & refining directly at
scale, unless costs improve," the Tesla chief executive tweeted
earlier this month. Lithium prices are up more than 80% this
year and nickel prices have gyrated heavily amid trading turmoil
in London.
    The billionaire entrepreneur had already complained about
"significant" jumps in raw materials costs for Tesla, which has
raised prices of its vehicles twice this year.  urn:newsml:reuters.com:*:nL4N2UQ0B3 
    "Should management be serious about entering the lithium
space, we think the most likely route would be an acquisition of
an existing lithium company," said Morningstar lithium analyst
Seth Goldstein.
    Shares of junior miner Lithium Corp  LTUM.PK  jumped more
than 30% on April 13 after unsubstantiated reports that it and
its Nevada brine deposits had been sold to Tesla, a rumor the
company denied. Shares of larger lithium producers, such as
Albemarle Corp  ALB.N , reacted little to Musk's tweets.
    "Elon, if you want to talk to us, come and say hello," said
Tom Lewis, Lithium Corp's CEO, who said the buyout rumors likely
were an "orchestrated plan to pump (our shares) up a bit."
    Amid the minerals talk, Musk last week made a $43 billion
cash offer to buy social networking platform Twitter Inc
 TWTR.N .  urn:newsml:reuters.com:*:nL3N2WC22G  urn:newsml:reuters.com:*:nL2N2WD0MB
    "If you're going to spend $43 billion and you run Tesla and
you understand better than anyone Tesla's future lithium needs,
you might want to spend a lot less and buy a lithium company or
two," said lithium industry consultant Joe Lowry. 
    
    'A HUGE DISCONNECT' 
    Tesla has never operated a mine, but it is building a
lithium processing plant in Texas and may need to build a nickel
refinery.
    "There's a huge disconnect in this country about metals
refining," said Corby Anderson, who teaches metallurgy at the
Colorado School of Mines. "And yet the public expects the
materials to be available to do the things they want."
    U.S. President Joe Biden said this month he would use a Cold
War-era piece of legislation to boost government funding for
metals processing, though not for new mines.
    In January, Tesla said it will buy 75,000 tonnes of nickel
concentrate from Talon Metals Corp's  TLO.TO  proposed Tamarack
mine project in Minnesota, starting in 2026.
    Musk asked the mining industry in 2020 to produce more
nickel "in an environmentally sensitive way," and Talon has said
it has plans to honor that request. 
    But it is not clear what Tesla will do with that nickel
concentrate, which needs to be smelted into a product known as
matte and further refined before it can be used to build battery
parts.
    The United States does not have any facilities to do that
processing, with the exception of a small salt byproduct
facility. Canada has a handful of nickel smelters and
refineries, though it mines more than those facilities can
handle and relies on refineries in Norway and the United
Kingdom. 
    That means Tesla would either have to build its own
facilities to process nickel, or rely on overseas companies,
thus boosting the nickel's carbon footprint. 
    Musk has hinted the company may have a new method to turn
nickel into the material needed for battery cathodes, but has
not provided details. Tesla did not respond to a request for
comment. 
    The automaker also recently struck a deal with Brazilian
mining company Vale SA  VALE3.SA  to supply nickel, according to
media reports. Vale declined to comment. 
    
    LITHIUM
    For lithium, Tesla is building a plant in Texas that will
convert spodumene concentrate - processed rock containing the
metal - into lithium hydroxide, a key building block for EV
batteries. 
    The automaker applied for Texas permits for its facility
last year, according to state records, though it is unclear when
that facility will open.
    A lithium supply deal with Piedmont Lithium Inc  PLL.O  was
put on hold last year. Tesla also has lithium supply deals with
Liontown Resources Ltd  LTR.AX , Ganfeng Lithium Co  002460.SZ 
and Core Lithium Ltd  CXO.AX .
    Musk's tweets, analysts said, are likely born from a desire
to push down spot lithium prices. Most lithium producers,
though, prefer to sell the metal on long-term contracts with
fixed prices that help them plan for future demand.
    Livent Corp  LTHM.N  and Albemarle, which are also Tesla
suppliers, have said they will not build more processing plants
if automakers fail to sign long-term deals.

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
EV industry must work closer with lithium suppliers, executives
say     urn:newsml:reuters.com:*:nL1N2SM28D
Lithium producers grow bullish as EV revolution turbocharges
demand      urn:newsml:reuters.com:*:nL1N2MR2O2
Biden eyes Cold War-era defense law to boost mining sector    
 urn:newsml:reuters.com:*:nL2N2VX2OB
Tesla signs deal for first U.S. nickel supply with Talon Metals 
    urn:newsml:reuters.com:*:nL1N2TQ27H
Elon Musk makes $43 billion cash takeover offer for Twitter   
 urn:newsml:reuters.com:*:nL3N2WC22G
FACTBOX--Automakers accelerate drive to secure battery raw
materials      urn:newsml:reuters.com:*:nL3N2WA2MN
FOCUS-New lithium technology can help the world go green -- if
it works     urn:newsml:reuters.com:*:nL1N2UK302
Tesla signed secret nickel supply deal with Vale     urn:newsml:reuters.com:*:nL3N2VX7HE
Musk says Tesla, SpaceX face 'significant' inflationary pressure
     urn:newsml:reuters.com:*:nL3N2VH0HP
Syrah Resources gets $107 mln U.S. loan for Louisiana EV battery
plant     urn:newsml:reuters.com:*:nL2N2WG182
FOCUS-Musk's plan for Tesla-built batteries has an acceleration
challenge     urn:newsml:reuters.com:*:nL4N2UQ0B3
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 (Reporting by Ernest Scheyder in Houston
Additional reporting by Hyunjoo Jin in San Francisco
Editing by Matthew Lewis)
 ((ernest.scheyder@thomsonreuters.com; Twitter: @ErnestScheyder;
+1-713-210-8512; Reuters Messaging:
ernest.scheyder.thomsonreuters.com@reuters.net))