Tesla's Supply of Materials - Anything planned yet?

[travwill]

Haven't heard anything announce other than the gigafactory is ahead of schedule. It seems apparent in all mining related articles that they all call out the huge increase in demand on common battery related raw materials; lithium, cobalt, graphite, etc. Yesterday had another one, specifically naming Tesla some, etc.

http://www.marketoracle.co.uk/Article51790.html

Questions:

1. Tesla seems to have mentioned that they will seek more environmentally friendly sources of materials, those humanely and safely mined, as local to the factory(s) as possible, etc. Haven't heard anymore on this as are they just going to be assembling batteries for a while perhaps and then when start producing will need refined raw materials?

2. Is there any though truly on Tesla securing their reliance on materials? As noted, the cobalt supplier, formation metals, has some mine in Idaho they are seeking to start-up. Couldn't Tesla at their (FM) value just snatch them up or create a guarantee with that single miner to snatch up all their supplier cobalt? same with other materials - to avoid market fluctuation and rising prices surely?

Anyway, this seems like a phase that has to be established before they start true operations so I'd guess we hear solutions to these issues around end of year or early 2016.

-T

 

[sandpiper]

Haven't heard anything announce other than the gigafactory is ahead of schedule. It seems apparent in all mining related articles that they all call out the huge increase in demand on common battery related raw materials; lithium, cobalt, graphite, etc. Yesterday had another one, specifically naming Tesla some, etc.

http://www.marketoracle.co.uk/Article51790.html

Questions:

1. Tesla seems to have mentioned that they will seek more environmentally friendly sources of materials, those humanely and safely mined, as local to the factory(s) as possible, etc. Haven't heard anymore on this as are they just going to be assembling batteries for a while perhaps and then when start producing will need refined raw materials?

2. Is there any though truly on Tesla securing their reliance on materials? As noted, the cobalt supplier, formation metals, has some mine in Idaho they are seeking to start-up. Couldn't Tesla at their (FM) value just snatch them up or create a guarantee with that single miner to snatch up all their supplier cobalt? same with other materials - to avoid market fluctuation and rising prices surely?

Anyway, this seems like a phase that has to be established before they start true operations so I'd guess we hear solutions to these issues around end of year or early 2016.

-T

Not sure if they're involved in negotiations with Tesla or not but there is a western Canada supplier of natural graphite (one of two in north America) that recently achieved the quality required for battery applications.

http://www.eaglegraphite.com/
Eagle Graphite Achieves Spheronized Graphite Purity of 99.995%

 

[MitchJi]

Eagle Graphite has the only graphite quarry in Western North America. It is the only North American junior graphite company with existing infrastructure, a quarry permit, and a flotation plant.

Sounds like a possible investment opportunity.

 

[Oil4AsphaultOnly]

Sounds like a possible investment opportunity.

Only problem is that when Tesla announced the 90kwh pack, they specified that they used some silicon with their "synthetic" graphite in their cathode. So that should kill any ideas about natural graphite mines.

 

[AmpedRealtor]

Check into PE.V (Pure Energy Minerals). They are the only supplier on the continent extracting lithium from brine deposits, which is the new frontier for lithium extraction, and are located in Nevada. They would seem to be a fit for Tesla and others, and their stock has tremendous upside potential, as it is currently trading under 40¢/share!

Pure Energy Minerals Poised to be One of a Few Lithium Winners - Equities.com - Global Financial Community

 

[travwill]

Check into PE.V (Pure Energy Minerals). They are the only supplier on the continent extracting lithium from brine deposits, which is the new frontier for lithium extraction, and are located in Nevada. They would seem to be a fit for Tesla and others, and their stock has tremendous upside potential, as it is currently trading under 40¢/share!

Pure Energy Minerals Poised to be One of a Few Lithium Winners - Equities.com - Global Financial Community

Thanks guys. Yeah, I'm looking at the little Canadian company Formation Metals in more detail now. It is just a penny stock right now, they are in need of financing, but seems like a positive study done on their mine in Idaho for Cobalt. That seems logical at this point to be tapped at some point in the future - would be dumb not to and keep using far away sources in DRC, etc.

 

[RobStark]

Rare Earth And Bacanora Sign Lithium Supply Deal With Tesla Motors

On condition that the Sonora project reaches certain performance milestones in the next two years, Tesla will buy lithium hydroxide to feed the manufacturing of batteries at its Gigafactory in Nevada. One of the conditions will be that the Sonora project can supply lithium hydroxide in accordance with volumes and time frames which Tesla will determine.

The supply deal is for an initial five years, starting from when Tesla makes its first order, with an option for this to be extended by another five years.

"The selection of the Sonora lithium project as one of the lithium suppliers to the Tesla Gigafactory is a landmark transaction that will support the development and commercialization of the Sonora lithium project. " said Rare Earth Chairman David Lenigas.

http://www.lse.co.uk/AllNews.asp?cod...h_Tesla_Motors

 

[neroden]

I see everyone else saw that report on Sonora Lithium too! First supply report. Unfortunately, it's just lithium, and there's a zillion lithium supplies. I'm much more curious about cobalt and graphite and most of all manganese.

 

[RobStark]

Lithium is only ~2% of lithium ion battery by volume.

At full capacity the GF will require ~8k metric tons of lithium per year.

Currently the world produces 37k metric tons of lithium per year.

So mining companies need to increase production of lithium by over 20% just to meet GF demand on top of increased demand by LG Chem,Samsung SDI, and Chinese EV battery suppliers.

GF demand for nickel, copper, cobalt,manganese and synthetic graphite is relatively small compared to the global demand for said minerals/materials.

Battery cells used in Model S have synthetic graphite that come from a barrel of oil not a graphite mine.

Lining up large amounts of lithium at below market prices is not unimportant.

 

[neroden]

GF demand for nickel, copper, cobalt, manganese and synthetic graphite is relatively small compared to the global demand for said minerals/materials.

Not really relevant. Copper is facing a worldwide supply crunch for the long term, so securing supplies (and reducing copper usage when possible) matters. Manganese is produced in low quantities overall from very limited supplies, so securing supplies matters to avoid being squeezed out -- and I don't see where they're going to get the promised North American supply. Cobalt is nearly all produced at one very geopolitically-unreliable African mine. Nickel shouldn't be too hard to secure, though.

Battery cells used in Model S have synthetic graphite that come from a barrel of oil not a graphite mine.

Which is a problem for the price structure. Synthetic graphite is already 2x the cost of natural; and oil is prone to sudden price spikes (price doubling overnight). Securing the graphite supply at a reliable reasonable price may be hard. The fossil fuel dependence is bad too.

Lining up large amounts of lithium at below market prices is not unimportant.

Yeah, but there were at least six obvious ways to do it, given the number of proven, not-depleted North American lithium deposits.

 

[RobStark]

Not really relevant. Copper is facing a worldwide supply crunch for the long term, so securing supplies (and reducing copper usage when possible) matters. Manganese is produced in low quantities overall from very limited supplies, so securing supplies matters to avoid being squeezed out -- and I don't see where they're going to get the promised North American supply. Cobalt is nearly all produced at one very geopolitically-unreliable African mine. Nickel shouldn't be too hard to secure, though.

Your "analysis" is not really relevant.

If the market of Copper was extremely Bullish long term the Chilean Peso would be appreciating fast.

Chile Peso to USD​

About half the world's current supply of Cobalt is from Congo. There is plenty in French New Caledonia.

Also promising exploration being done in Idaho. World supply of Cobalt is about 110k metric tons per year. At full capacity Tesla's GF will need about 7 metric tons. Panasonic's supplier Sumitomo Heavy Industries is already securing new supply in the Philippines. There is plenty of opportunity to secure long term Cobalt supply outside of The Congo for a company that wants to ethically mine and sign a long term contract guaranteeing demand for the mining company as well as supply for the end user.

Which is a problem for the price structure. Synthetic graphite is already 2x the cost of natural; and oil is prone to sudden price spikes (price doubling overnight). Securing the graphite supply at a reliable reasonable price may be hard. The fossil fuel dependence is bad too.

Synthetic graphic is made from petroleum coke, a cheap byproduct of refining oil. It can also be obtained from coal(a byproduct of producing steel), the price of which is extremely bearish even possibly considered a stranded asset. In this context the petroleum byproduct is not fossil fuel because it is not being used as a fuel, it is not being burned. And it can be recycled.

What makes synthetic graphite expensive is high energy intensity not the source material. Which is where cheap renewables comes in as well as improved manufacturing technique.

Percentage of Manganese Exports by country in 2006.

Biggest reserves is S Africa but Australia has more than enough. Manganese is the 12th most abundant mineral in the earth's crust.

 

[neroden]

I think the reason we're not communicating clearly is that I'm thinking significantly longer-term than you are.

Thanks for the analysis of the *short-term* outlook for synthetic graphite.

Synthetic graphite is still 2x the price of natural, but if it can be made as a *byproduct* of coke production for steel production, then there will be an source which is cheap for a decade, maybe two. However, coke is on its way out due to high expense and very high carbon emissions -- eventually the basic oxygen process for steel will displaced by the Hisarna or Finex process or just direct-reduced iron. Petcoke is already being produced as a product in its own right because demand is higher than the amount produced as a byproduct, so there's upwards pressure on its price too. I really wouldn't count on reliable synthetic graphite supplies staying even as cheap as they are now. Maybe Tesla will stick with it for quality-control reasons, but the price is something to watch.

You're looking at *short-term* data on copper. Here's a more relevant chart for the long term, and it doesn't really go back far enough to show the whole picture:
Historical Copper Prices and Price Chart - InvestmentMine

The whole picture is that real copper prices have been rising since 1940:
https://doc.research-and-analytics.csfb.com/docView?language=ENG&format=PDF&document_id=901543261&source_id=em&serialid=tKkO3pFei2IPAD9fPG%2F6mrmsM6dNLQlvDdbE5qGTHck%3D

The first problem with copper is that we keep finding more and more use for it. Although we do recycle most of the copper when copper stuff goes out of service, most of the copper just... stays put. It goes into things with very long service lives. While we put in even more wiring and other things which use copper. This is in contrast to the trend for most other base metals, except iron. But there's a lot more high-grade iron reserves then there are copper, which is the second problem with copper.

Manganese is the 12th most abundant mineral in the earth's crust.

Unfortunately, much of that is in obnoxious low-concentration forms (such as the ~440 ppm in the soil), or in the manganese nodules on the seabed, which are expensive to recover. It's not about abundance in the crust, it's about whether it can be effectively concentrated.

Certainly, Australia may have more than enough cheaply recoverable manganese, but Musk promised North American sourcing for all minerals.

Likewise, there may be a cobalt supply in New Caledonia, *but Musk promised North American sourcing for all minerals*.

Tesla to Use North American Material Amid Pollution Worry - Bloomberg Business

I think most of us can list off a whole bunch of potential North American sources for lithium (I can think of six off the top of my head other than the Sonora one); we've got huge North American lithium reserves. It's not so hard to list off North American sources of aluminum, natural graphite, nickel, or of course iron, and synthetic graphite can certainly be made in North America from North American oil or coal. I can come up with three North American sources of cobalt, maybe four. Can you list off the potential North American manganese sources? 'Cause I can only find three possibilities, and all look really speculative.