Tesla’s raw material needs, including lithium, are increasing rapidly with its battery production ramp-up at Gigafactory 1 in Nevada to support the Model 3 production and other energy storage projects.
In order to secure some of the supply, Tesla has now signed a new offtake agreement with an integrated lithium miner and refiner in Australia.
Kidman Resources Limited has a 50/50 joint venture arrangement with Chilean chemicals giant SQM to exploit its Mt Holland lithium project in the Earl Grey deposit in Western Australia and make lithium hydroxide for batteries.
In a press release today, Kidman announced the offtake agreement with Tesla:
“The Agreement is for an initial term of three years on a fixed-price take-or-pay basis from the delivery of first product, and contains two 3-year term options. The other commercial terms of the Agreement are strictly confidential.”
The company estimates that it represents less than 25% of its initial capacity at the refinery, but they didn’t disclose details about the capacity or price.
Interestingly, Tesla was reportedly in talks with SQM to secure lithium in Chile, where the company is based, earlier this year.
Tesla has been increasingly involved in the battery supply chain since it started its Gigafactory project with Panasonic and it has been trying to secure raw materials from many different sources.
The automaker already signed a conditional supply agreement with Pure Energy Minerals, which has claims on 9,500 acres of lithium brine in Clayton Valley – just a four-hour drive from the Tesla Gigafactory, but the mining company has yet to enter a production phase and therefore, Tesla needs to secure other sources.
Back in January 2017, Tesla said that it had secured lithium supply through 2017, but the real volume is expected to come in 2018 with the Model 3 production ramp-up to 5,000 cars per week and the company didn’t release an update on its effort.
I expect to see more similar offtake agreements from Tesla in the near future. Not just for lithium, but also for other important materials like cobalt, nickel, graphite and more.
Gigafactory 1 is currently only producing at a fraction of its planned total capacity and this new deal might not even be for lithium to supply the plant.
Tesla has talked before about trying to use shorter supply chains for raw materials at the Gigafactories and this deal could very well be for Tesla’s upcoming Chinese Gigafactory since the lithium project is not up-and-running yet.
Either way, it’s an interesting development in the race to secure supply of key battery materials ahead of an expected great expansion in demand in the next few years.
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