In the same category

Can Tesla Make Winners Out of These Lithium Players?

IMG Auteur
 
Published : August 31st, 2015
449 words - Reading time : 1 - 1 minutes
( 0 vote, 0/5 )
Print article
  Article Comments Comment this article Rating All Articles  
0
Send
0
comment
Our Newsletter...

Tesla Motors Inc. (TSLA:NASDAQ), long known for its ability to keep its buzz machine churning, gave lithium investors something to get excited about this weekend. On Friday, Bacanora Minerals Ltd. (BCN:TSX.V) and Rare Earth Minerals Plc (REM:LSE), owners of the Sonora Lithium Project, announced that they had finalized a conditional, long-term lithium hydroxide supply agreement with the car and battery giant. The Energy Report reviewed the commentary of leading lithium experts Simon Moores and Chris Berry to anticipate what the new agreement may mean for the sector.

24hGold - Can Tesla Make Winne...

For his part, Colin Orr-Ewing, chairman of Bacanora, is enthusiastic about what the deal means for his company and its partner: "This supply agreement with Tesla represents a vital and monumental step forwards in the commercialization of the large lithium resources that the company holds, together with its partner Rare Earth Minerals, in northern Mexico. We anticipate this contract to rapidly accelerate the development of the Sonora Lithium Project, which we expect will prove to be invaluable in an increasingly lithium-hungry world."

Leading battery manufacturer Panasonic Corp. is predicting powerful growth in emerging markets for lithium-ion batteries. The chart below shows Panasonic's expectations between 2014 and 2025.

24hGold - Can Tesla Make Winne...Source: Benchmark Mineral Intelligence

Welcome Relief for Lithium Companies?

Tesla's supply chain strategy could have a positive effect on a lithium industry that badly needs new investment. The deal has piqued investors' sometime-waning interest in the lithium sphere. But Simon Moores warns there are challenges: "The biggest hurdle to the agreement is Bacanora's need to secure significant financing through debt and/or equity, which Tesla may itself be involved in."

And though Chris Berry calls the deal "an encouraging first step," he remains cautious, noting "while it likely won't breathe new life into the mining space (if Friday's closing prices of the 34 lithium plays I track are any indication), it is a signal of companies anticipating future demand. I would expect to see Tesla and perhaps other battery manufacturers undertake additional 'out-of-the-money call option'-type deals as the lithium market tightens over the next two years. This is also likely to be true for cobalt and graphite."

The Takeaway

Simon Moores stresses to investors that thinking long term is crucial. "The timing appears good for Bacanora, with lithium prices at five-year highs intensifying the need for new supply. Lithium hydroxide has risen as much as 25% this year, while carbonate is up as much as 15% on 2014 levels. A lack of new supply in the face of steadily increasing battery demand has seen the lithium industry fall into a supply shortage."

Chris Berry had this takeaway: "Perhaps the most significant conclusion is that you're just starting to see these next-generation value chains come to life."

 

Data and Statistics for these countries : Mexico | All
Gold and Silver Prices for these countries : Mexico | All
<< Previous article
Rate : Average note :0 (0 vote)
>> Next article
Comments closed
Latest comment posted for this article
Be the first to comment
Add your comment
Top articles
World PM Newsflow
ALL
GOLD
SILVER
PGM & DIAMONDS
OIL & GAS
OTHER METALS
Take advantage of rising gold stocks
  • Subscribe to our weekly mining market briefing.
  • Receive our research reports on junior mining companies
    with the strongest potential
  • Free service, your email is safe
  • Limited offer, register now !
Go to website.