After signing a preliminary lithium hydroxide supply agreement with Tesla Motors Inc. on 15 September, Pure Energy Minerals Limited is poised for significant gains as the race to build the biggest battery gigafactory intensifies.
According to the agreement, Pure Energy Minerals Limited (TSXV:PE; OTC:HMGLF) will potentially supply Tesla with lithium hydroxide from future planned production at its Nevada lithium brine project, following a technical and economic feasibility study. If all goes well, Pure Energy will secure a commitment for the supply of annual volumes of lithium hydroxide to Tesla and its authorized buyers for a 5-year period.
The agreement makes sense because Pure Energy is sitting on top of the only Lithium Brine resource in North America. What’s more, lithium—already in high demand for many of our household goods—is about to experience a significant spike in demand thanks to the emerging battery energy war.
Against this backdrop, lithium supplies are thinning, the Lithium Oligopoly just raised their prices an additional 15 percent last week. And the game is on to find new producers with new lithium plays who can deliver lower costs.
Tesla’s battery gigafactory alone will require 15,000 tons of lithium carbonate a year just to get started--as soon as next year.
It also makes sense because Pure Energy’s Clayton Valley South Lithium Brine Project is not only located in the same basin as the only producing lithium operation in the US—Albemarle’s Silver Peak mine—but is also only 3.5 hours from Tesla’s growing battery business units.
The agreement with Pure Energy sets a predetermined price for a portion of Pure Energy’s production (both undisclosed) and the price is below current market rates and aligned with Tesla’s goal to continuously reduce the cost of its lithium ion batteries.
While lithium is the mineral of choice for battery makers due to its high electric output per unit weight, demand for lithium is expected to soar most dramatically with grid storage, the ‘powerwall’, and the production of hybrid, plug-in hybrid and electric vehicles used by everyone from Toyota (NYSE:TYO), Honda (NYSE:HMC), Nissan (NYSE:NSANY), Renault (EPA:RNO), and Mitsubish (NYSE:MSBHY), to Ford (NYSE:F), Chevrolet and GM (NYSE:GM). And of course Tesla Motors (NASDAQ: TLSA).
As such, lithium is the front line on the battlefield for battery gigafactories, and Pure Energy has found itself sitting in a prime position.
Robert Mintak, Pure Energy CEO, commented, "This agreement with Tesla is a significant milestone that validates Pure Energy's lithium brine project and business development model, and is an important step in the development of the Project. Pure Energy is aligned with both Tesla's and the state of Nevada's development objectives, and we hope to positively contribute to Nevada's booming clean energy based economy."
So far, the company appears to be on track with its objectives—enough so to attract the concrete attention of Tesla, which is no small feat.
As an integrated lithium mining and processing developer, Vancouver-based Pure Energy focuses on green 'cradle to cradle' lifecycle solutions for lithium supply in North America, targeting the production of high-value lithium compounds such as Lithium Carbonate (Li2CO3) and Lithium Hydroxide (LiOH.H2O), which are primarily used in the emerging lithium ion battery market.
All eyes will now be on its advancement of the Clayton Valley Lithium Brine Project, which recently saw the successful completion of drilling and seismic surveys, reporting an inferred resource estimate of 816,000 metric tons of lithium carbonate equivalent (LCE) located on over 8,000 acres of its claim area—a significant amount even from a global perspective, and significant enough to warrant a potential supply agreement Tesla.
Tesla’s Elon Musk is eyeing a “complete transformation of the entire energy infrastructure of the world to completely sustainable zero carbon”, and what he’s talking about here is lithium-battery production on a mind-blowing scale. Tesla alone is planning to produce more lithium-ion batteries in this factory than in the entire global marketplace combined, and investors will be looking closely at Pure Energy’s piece of this pie.
By James Burgess of Oilprice.com
Legal Disclaimer/Disclosure: Pure Energy Minerals is an Oilprice.com client. This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. No information in this Report should be construed as individualized investment advice. A licensed financial advisor should be consulted prior to making any investment decision. We make no guarantee, representation or warranty and accept no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Oilprice.com only and are subject to change without notice. Oilprice.com assumes no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Furthermore, we assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information, provided within this Report.