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Dave Forest

Dave Forest

Dave is Managing Geologist of the Pierce Points Daily E-Letter.

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This Joint Venture Could Stir Up The Lithium Market

This Joint Venture Could Stir Up The Lithium Market

Rumors are swirling that the rare metals space is close to an unusual joint venture deal. One that shows how alternative financing arrangements are continuing to become a major story for the beaten-down mining sector.

The deal is all the more interesting because it involves the world’s largest copper miner: Chile’s state-run Codelco. Which local papers said late last week is looking at a joint venture for a completely different commodity.

Lithium.

This of course isn’t a major step out for Codelco. Chile is the largest producer of lithium in the world — and Codelco holds a major land package across the country. Related: North America’s Best Shale Patch

But the rumored partner with Codelco on the lithium investment is more surprising: U.S. electric car manufacturing phenomenon Tesla.

According to the local press, “top executives” from Tesla have met with Chile’s government in recent weeks. With the goal being to “suggest an agreement with Codelco” on lithium.

Few details were given about what a potential Tesla-Codelco deal might look like. But it would presumably involve Codelco contributing exploration or development lands from its portfolio — and Tesla contributing some or all of the capital for identifying and producing lithium deposits. Related: Is OPEC Losing Influence?

If such an arrangement does materialize, it would be an extremely interesting move for Tesla.
The company needs large amounts of lithium for its electric car batteries. And supply for this metal is somewhat unnerving — given that only five countries outside the U.S. produce significant amounts of the metal.

Three of those lithium-producing nations are China, Argentina and Zimbabwe. Which Tesla might be hesitant to rely upon for output. Related: Marathon Abandons $270 Million Ultra-Deepwater Project

The only other major producers are Chile and Australia. A fact Tesla has obviously decided to act on — attempting to secure a direct deal with the closest and most apparently-reliable supply nation.
Such an approach might have got little attention three years ago. But the fact that Codelco is now apparently considering the concept shows how the current downturn has changed big miners’ ideas on funding sources.

Officially, Codelco says it has not made any formal agreement yet. Watch for announcements over the coming weeks — which may show the “age of the end user” rising in mining investment.

Here’s to going to the source

By Dave Forest

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