TORONTO (miningweekly.com) – Electric vehicle maker and energy storage solutions provider Tesla Motors has signed another lithium hydroxide offtake agreement, this time with TSX-V-listed Pure Energy Minerals, which is developing the Clayton Valley lithium brine project, in Nevada.

Tesla's willingness to back the higher-risk junior mining sector, rather than striking a deal with an established producer, came as a surprise to many in the mining and investment industries, as Tesla sought to secure lithium supplies outside of dominant supplier, China.

Tesla, under the visionary leadership of South Africa-born entrepreneur Elon Musk, was busy building its first $5-billion Gigafactory in Nevada, in collaboration with Panasonic, where the partners expected to produce more lithium-ion batteries in 2020 than were produced globally today – about 500 000 t/y – and create significant new demand for lithium sources outside of China.

Partners TSX-V-listed Bacanora Minerals and LSE-listed Rare Earth Minerals (REM) late in August became the first companies to finalise a conditional long-term lithium hydroxide supply agreement with Tesla, a deal that would see the partners develop the Sonora lithium project, in Mexico – a mineral-rich, lithium-bearing clay deposit  – into a planned low-cost, sustainable and environmentally conscious mining operation.

Nevada was the only location in North America to mine lithium. Albemarle/Rockwood Lithium's Silver Peak operation produced comparatively small amounts of lithium carbonate and lithium hydroxide to the rest of the world.

Potentially also playing into Tesla's favour was the announcement earlier this month by Quebec-based lithium/tantalum project developer Critical Elements that it had struck a “game changing” strategic collaboration agreement with an unnamed chemical company that included offtake for all products produced from the Rose project, in Quebec.

Without identifying its strategic partner, Critical Elements said its partner had a history spanning more than 50 years, operating worldwide and being a financially strong company with specific knowledge. It guaranteed access to the major markets worldwide with an entry to significant customers.

PROJECT DEVELOPMENT
"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,” Pure Energy CEO Robert Mintak commented.

The Clayton Valley project was next to the only producing lithium mine in North America and, as at July, held a compliant inferred resource of 816 000 t of lithium carbonate equivalent.

The deposit comprised a salty groundwater (brine) with high levels of lithium contained in two aquifers (the Main Ash aquifer and the Lower Aquifer system) that ran below Pure Energy’s claim area. The brine would be ‘mined’ by simply drilling bore holes into the aquifers and pumping it to surface for lithium removal.

The company’s product would be used in the battery cell manufacturing process of Tesla's rapidly growing electric vehicle and stationary storage business units, which were located about 3.5 hours by car from the project. Any deliveries from Pure Energy would cover a portion of Tesla's needs with the remainder to come from other sources.

Pure Energy on Wednesday advised that it would now take the Clayton Valley project through a preliminary economic assessment, a prefeasibility study, or feasibility study to confirm the technical achievability and economic viability of the project.

Provided that Pure Energy met certain terms and conditions related to project execution, product quality and timing of delivery, the agreement established a commitment for a yearly purchase volume of product over five years by Tesla and/or its authorised purchasers.

Importantly, the agreement set a predetermined price that was below current market rates and was aligned with Tesla's goal to continuously reduce the cost of its lithium-ion batteries, Pure Energy said.

The company's TSX-V-listed stock rose 29% to C$1.03 in early morning trading, before closing the day flat at C$0.80 apiece amid significant investor interest in the junior stock.