Tesla to Produce Its Own Lithium After Acquisition Falls Through

Tesla announced recently that it has secured its own lithium mining rights in Nevada after scrapping a plan to buy a company in the southwestern part of the state.

The automaker has been having discussions in recent months with Cypress Development Corporation, looking to extract lithium from clay deposits in southwest Nevada. However, the two companies couldn’t reach a deal.

The electric carmaker said it will cut its battery costs by 50% and will instead focus on the plan CEO Elon Musk detailed recently to mine lithium on its own in Nevada.

tesla lithium
tesla lithium
Chemetall Foote Lithium Operation, Esmeralda County, Nevada

Making lithium from clay is difficult to do and costly, and there has yet to be a company that has been able to produce commercial quantities using the practice. However, a push into mining is at the core of a Tesla plan to cut battery costs and deliver on a promise to bring a $25,000 electric car to market.

BNEF projects that unconventional resources, mostly clay mining, will account for about 5% of global supply of mined lithium by 2030. The most common method of extracting lithium raw materials is at brine operations which pump liquid from underground reservoirs into vast evaporation ponds, or in traditional hard rock mines.

“This move by Tesla supports the importance of clays as a future source of lithium in the United States,” Cypress CEO Bill Willoughby said in a statement, referring to Tesla’s plan to extract lithium from clay.

Musk recently told investors that his company has secured access to 10,000 acres of lithium-rich clay deposits in Nevada and planned to use a new, “very sustainable way” of extracting the metal.

Musk said the company is focusing on development of a process to extract the metal using sodium chloride, or table salt, rather than more expensive chemical reagents. No mine currently uses this process, observers say.

Tesla’s decision to make its own battery cells and to enter production of battery cathodes and associated raw materials is designed to add in-house capacity alongside deals with external suppliers as demand for electric vehicles rises.

Tesla has signed a five-year raw-materials contract with Piedmont Lithium Ltd., which has a project in North Carolina.

Automakers are looking for more of a role in their supply chains to make certain that they’ll have access to raw materials in the right volumes, according to Albemarle Corp., the top lithium producer. It’s an issue that has come to the forefront as the lithium demand forecast rising dramatically, and supply likely to lag. That’s because expansions and new mine projects have been stopped as a result of price declines since mid-2018.

The lithium mine is just one component of the company’s quest to build a cheaper, more efficient battery that will ultimately allow it to drop the price of its vehicles.

tesla lithium 3
tesla lithium 3
Lithium Atom

A recent report from market intelligence publisher Benchmark Mineral Intelligence also states that Tesla is planning to build a lithium hydroxide chemical plant in Texas. This new conversion and refining plant will convert hard rock spodumene ore into lithium hydroxide, which battery cells use.

Before Tesla’s battery efforts, this process has commonly been done in China using spodumene that’s sourced from Australia. In its report, Benchmark Minerals said that Tesla will be using a hydrometallurgical process to turn its spodumene ore into lithium hydroxide — eliminating the use of sulphuric acid. No testing of this process has taken place on a commercial scale.

The lithium mine as well as the proposed cathode facility will be two new additions to Tesla’s growing portfolio of factories and operations.

“We’re gonna go and start building our own cathode facility in North America and leveraging all of the North American resources that exist for nickel and lithium, and just doing that, just localizing our cathode supply chain and production, we can reduce miles traveled by all the materials that end up in the cathode by 80%,” commented Drew Baglino, the SVP of powertrain and energy engineering at Tesla.

Ryan Carpenter serves as Attorney and Managing Director of Carpenter Wellington. Ryan advises clients across a broad set of corporate and commercial matters.

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