In our November 16, 2020 Resource Erectors article we took a look at how two industry-leading North American mining companies in Canada and the US are teaming up to ensure a reliable domestic “mine to magnet” supply line, one that will significantly reduce or even eliminate Communist China’s disruptive interference. At a time when worldwide political pressure is driving global growth and demand, creating intensely competitive REE (rare earth element) markets, Tesla’s Elon Musk has made it a priority to establish and secure the entire lithium-ion battery supply chain.
To maintain Tesla’s rate of growth, Musk must consider the comprehensive critical mineral logistics from extraction mining, to refining the metals that go into the batteries powering its EVs and renewable energy storage line, to the final cell manufacturing. Musk has already offered giant contracts to motivate the world’s nickel miners. Cobalt is another essential metal on which Tesla productivity depends.
And Tesla is not without global competition for these REE minerals.
“World Bank forecasts that the rise of EVs and renewable energy will power a 500% increase in the annual demand for battery minerals over the next three decades.”-Metal Tech News
With every major automobile manufacturer around the world rolling out electric vehicles and hybrids, massively increased demand has made the “battery/magnet minerals” group a hot commodity, including:
That means that Tesla isn’t the only automotive company cutting direct deals with miners. BMW has already secured a deal with the Moroccan mining company Managem to lock in a 100 million euro supply of cobalt, an essential element for lithium-ion batteries needed for expansion of the company’s EV line over the next 5 years.
Supplying the Tesla Gigafactories With Critical Minerals
Hints about a direct Musk move into the mining business go back at least to 2019, when Tesla’s CEO brought up the problem of securing a reliable mineral supply at a shareholder’s meeting. This was after production for a Class 8 semi-truck and plans for the Tesla “Cybertruck” pickup were announced, according to the June 11, 2019 report at techcrunch.com. All of Tesla’s production and growth potential is dependent on the ability to manufacture the enormous quantity of lithium-ion batteries for these more complex, state-of-the-art EVs. Without the essential metals to produce those in sufficient quantity, Musk told shareholders;
“There’s not much point in adding product complexity if we don’t have enough batteries,” he said. “That is complexity, but without gain.”- “Tesla might get into the mining business to secure minerals for electric batteries”- techcrunch.com
Tesla Gigafactory 1 is appropriately located in Sparks, Nevada and manufactures Model 3 electric motors, battery packs, and Tesla’s Powerwall and Powerpack energy storage products in partnership with Panasonic. Production and rollout at the factory has been scaled below full capacity to match the current limited mineral supplies.
Back in 2019 the always forward-thinking Musk had already concluded that a move into the mining business was probably inevitable. At that time he stated that to enable a higher level of production;
Tesla would need to “look further down the supply chain and get into the mining business, I don’t know, maybe a little bit at least. We will do whatever we have to do to ensure that we can scale at the fastest rate possible. ”
Last January, 2020 Tesla began negotiations with Glencore Plc. to supply its Shanghai Gigafactory with cobalt. According to the Financial Post, Tesla is maneuvering to “avoid a future supply squeeze on the key battery metal”. Glencore is one of the world’s leading producers of cobalt, with mines in the Democratic Republic of Congo, Australia, and Canada where cobalt is produced as a byproduct of their nickel mining operations.The Tesla deal is estimated to provide as much as 6,000 tons of cobalt per year for lithium-ion battery manufacturing. The Glencore cobalt supply will also shore up EV and battery production in Tesla’s new plant in Germany.
Musk’s Move into US Mining Confirmed: September, 2020
On September 22,2020 designated as Tesla’s Battery Day, Elon Musk verified that Tesla had secured the rights to a 10,000 acre lithium deposit in Nevada, the first step to establishing a domestic supply chain after a turbulent year of disruptions triggered by worldwide Covid 19 shutdowns. But the Nevada acquisition is just the beginning of an aggressive North American supply strategy for Tesla. A new North American cathode manufacturing facility is also in the works to boost battery production.
Drew Baglino, the SVP of powertrain and energy engineering at Tesla, laid out the strategy stating;
“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%.”
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