Tesla Motors Model S.
Photo by: Reuters
TORONTO (miningweekly.com) – US electric vehicle manufacturer Tesla Motors’ recently revealed plans to build a new $5-billion lithium-ion battery ‘gigafactory’ has caused quite a “buzz” in the cobalt world.
Tesla Motors spokesperson Liz Jarvis-Shean confirmed to Mining Weekly Online that the innovative company had taken a strategic approach with a view to developing the closest supply chain possible.
Tesla is not specifically limited to North America if there are other suppliers nearby that can demonstrate a lower overall landed cost and comparable environmental impact, and its new focus is to consider the material price and the environmental impact of it.
“One of the key reasons is to more completely consider the total environmental impact of the supply chain while significantly reducing battery cost. Our goal is to build batteries with the lowest environmental impact possible and that necessitates looking at where the raw materials come from and how much impact there was in mining, processing and transporting them,” Jarvis-Shean said.
She added that transportation impacts were very significant for the heaviest raw materials if they need to be moved from halfway around the world.
“This may not always be properly captured [yet] in the landed cost but we believe it needs to be considered. In addition, there are other benefits such as reduced logistics time and less working capital tied up in transit.
“In the long term, when all costs are considered, it should be cheaper to source most materials from as nearby as possible,” she said.
The proponent of one of North America’s near-term mines that would produce substantial quantities of cobalt, Fortune Minerals, and its Nico mine, located in Canada’s Northwest Territories, said that it was probably the best positioned in North America to become one of Tesla’s preferred cobalt suppliers.
Fortune CEO Robin Goad told Mining Weekly Online that in light of the anticipated increase in cobalt demand Tesla’s gigafactory would create, there really were not many cobalt companies positioned to supply cobalt.
“We intend to approach Tesla to become a preferred supplier of cobalt from our Nico mine,” he affirmed.
Goad said that should Tesla’s plan to double the output of lithium-ion batteries succeed, it would have far-reaching consequences for the cobalt market.
According to him, the current global cobalt market is about 85 000 t/y, of which about 42% is taken up by the rechargeable batteries industry.
“So, the impact of the factory alone could potentially lift cobalt demand by 30 000 t/y to 35 000 t/y. In any event, the demand for rechargeable batteries was expected to reach 100 000 t/y at some point soon,” he said.
This could lead to a supply crunch and a price spike.
According to the US Geological Survey, the US has not mined cobalt since 1971, and had only about 301 t remaining in a government stockpile.
Goad noted that right now, some of the largest players in the cobalt industry, including GlencoreXstrata and others, are predicting a supply deficit by as early as 2016, but no later than 2017.
That would only be exacerbated by supply disruptions. The Democratic Republic of Congo (DRC) currently produces about 60% of the global cobalt supply, and refinery production is about 43%-dominated by China.
While China has its own policy risks, the DRC has geopolitical risks. The DRC is also mulling additional taxes and could potentially seek to force in-country value addition of its raw resources.
Fortune aimed to become a reliable Canadian source of cobalt sulphate. However, the company’s planned $200-million metals processing plant, 27 km north-west of Saskatoon, Saskatchewan, would allow it to produce a variety of products specifically tailored to client needs and to target the rechargeable battery market.
“Our proposed Saskatchewan refinery will stand out as a North American facility dedicated to the production of cobalt chemicals needed to manufacture rechargeable batteries used in portable electronic devices and electric vehicles, the latter currently driving transformational growth in the market for cobalt,” he said on Wednesday in announcing the results of a positive feasibility study for the Nico project.
Goad stressed that Tesla’s announcement made it clear that they were looking for North American suppliers.
The current North American cobalt producers are all focused on producing either a cobalt briquette, such as Sherritt International, which cannot supply into the US because of the Cuban trade embargo – and Vale and GlencoreXstrata, which produce a cathode targeting the super alloy business. Other juniors in Canada such as Formation Capital are also focused on producing a catalyst material.
“This appears to position us as the only company stating that we are specifically targeting the lithium-ion battery market with our cobalt,” he said.
An updated feasibility study for the Nico project had resulted in increased compliant reserves to 33.1-million tonnes; increased contained gold in the deposit to more than 1.1-million ounces; a levered base case pre-tax internal rate of return (IRR) of 15.6% (after-tax 15.1%) using lower commodity prices than a 2012 study; a levered pre-tax 7% discounted net present value (NPV) of C$254-million (C$224-million after tax); and cycle metal price sensitivity analysis indicating the potential for a levered 7% discounted pre-tax NPV of C$543-million and IRR of 23.6% (C$505-million NPV and 23.2% IRR after-tax).
Another resource that would be significantly impacted by the giant factory is graphite.
Last month, UK-based analyst Industrial Minerals Data (IM Data) manager Simon Moores said that the gigafactory could potentially increase natural graphite demand by up to 37% by 2020.
The factory, which is forecast to start production by 2017, is expecting to have an output of 35 GWh/y by as early as 2020, which would more than double the size of the current graphite market.
IM Data had calculated that Tesla's plant - which is set to be based in the south-west US - would consume at least 28 000 t of spherical graphite every year if operating at capacity.
While research and development firms have been actively exploring non-graphitic carbon anode alternatives, the position of graphite anodes as the current material of choice for lithium-ion battery producers means the graphite industry is likely to be the beneficiary of this growth, the analysts wrote.
Whether Tesla plans to use spherical graphite - made from large natural flake graphite – or synthetic materials, expansion of the battery market for electric vehicles on this scale presents a valuable opportunity to graphite suppliers.
The factory would also impact lithium, another critical element in electric vehicle batteries, and which is sourced mainly from South America and Australia.
Despite Tesla’s Jarvis-Shean declining comment as to whether the company believed there were enough potential new mines for graphite, cobalt, etcetera, coming on stream in North America to feed its factory’s future demand, she did concede that Tesla was beginning to plan and work closely with mining companies to align capacity and timing.
Currently, the majority of the cobalt in battery cells used in Tesla battery packs comes from the Philippines. The vast majority of its graphite is made synthetically in Japan and Europe, as it has much better properties than the microstructure of mined graphite, she said.
“The gigafactory will allow us to achieve economies of scale and minimise costs through innovative manufacturing, reduction of logistics waste, optimisation of co-located processes and reduced overhead. It is designed to reduce cell costs much faster than the status quo; by the end of the first year of volume production of our mass market vehicle, we expect the gigafactory will have driven down the per kWh cost of our battery pack by more than 30%,” Jarvis-Shean said.
She added that Tesla is excited to continue building relationships with mining and materials companies.
“Ultimately, the transition to electric vehicles and sustainable energy is going to create a huge opportunity for growth in the mining industry around select materials and their recycling. It is critical to Tesla and our customers that this need is met in the most environmentally responsible and sustainable way possible. We look forward to more discussions with future partners that share this mindset,” she said.
In the past five days, the TSX-listed stock of Fortune Minerals gained 7.8%, while that of Formation Metals jumped 31.58%.