Tesla switched on to se­cur­ing lithium sup­ply in Aus­tralia

The Mercury - - BUSINESS REPORT - David Stringer

TESLA struck a lithium hy­drox­ide sup­ply deal with a ju­nior Aus­tralian miner that won’t start pro­duc­tion un­til the next decade, un­der­lin­ing the scram­ble for the raw ma­te­ri­als needed to meet fore­cast de­mand for elec­tric ve­hi­cles.

Kid­man Re­sources will sup­ply Tesla from a planned re­fin­ery in Western Aus­tralia for an ini­tial term of three years, the com­pany said yes­ter­day, with­out dis­clos­ing fi­nan­cial terms. The fixed-price agree­ment also con­tains op­tions for a cou­ple of three-year ex­ten­sions.

It’ll be 2021 be­fore Kid­man be­gins pro­duc­ing the much­sought-af­ter lithium hy­drox­ide un­der a joint ven­ture with Chile’s gi­ant So­ciedad Quim­ica y Min­era de Chile. A mine to feed the plant at Mt Hol­land – the world’s third-largest hard rock lithium de­posit – won’t be built un­til next year, ac­cord­ing to a pre­sen­ta­tion this month.

“The fact that this is a deal for a prod­uct that won’t be avail­able for three years shows the ur­gency in the sec­tor,” Reg Spencer, a Syd­ney-based an­a­lyst at Canac­cord Ge­nu­ity Group, said by phone.

“Car­mak­ers are in­creas­ingly will­ing to go all the way up­stream, even to the in­di­vid­ual mine, to se­cure sup­ply.”

Car and bat­tery man­u­fac­tur­ers, in­clud­ing Elon Musk’s Tesla, are on a global hunt for sources of lithium, cobalt and other raw ma­te­ri­als, with BMW fore­cast­ing in De­cem­ber that its re­quire­ment for the key met­als will surge 10-fold by the mid­dle of the next decade. Pro­duc­tion of lithium alone prob­a­bly needs to quadru­ple within a decade to meet de­mand for EVs, the Gold­man Sachs Group said last year.


Tesla plans to an­nounce the lo­ca­tion of a new gi­gafac­tory in China as early as in the third quar­ter as it seeks to pro­duce bat­ter­ies and cars in the world’s big­gest elec­tric ve­hi­cle mar­ket. The com­pany de­clined to com­ment on its deal with Kid­man.

Kid­man closed 2.8 per­cent higher in Syd­ney yes­ter­day. The de­vel­oper’s shares have surged more than 400 per­cent in the past year. Lithium pro­ducer Gal­axy Re­sources rose 8.4 per­cent, as Oro­co­bre jumped 7.1 per­cent.

Kid­man is seek­ing to agree about three sup­ply deals and has held talks with bat­tery man­u­fac­tur­ers, car mak­ers and trad­ing houses, chief fi­nan­cial of­fi­cer Charles McGill said in an in­ter­view last week. The com­pany aims to also re­tain some ma­te­rial for sales in the spot mar­ket.

Chile’s SQM and Kid­man are tar­get­ing an­nual ca­pac­ity of 44 000 met­ric tons of lithium hy­drox­ide from their joint re­fin­ery in Western Aus­tralia.

Kid­man’s deal with Tesla equates to less than a quar­ter of the com­pany’s ini­tial share of pro­duc­tion, ac­cord­ing to its state­ment. – Bloomberg

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