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Is Elon Musk considering Tesla gigamines?

CEO indicates willingness to go mining to ensure Tesla growth Metal Tech News Weekly Edition – July 29, 2020

Will gigamines be added to the front of the Tesla supply chain?

While Elon Musk's offer of a "giant contract" to mining companies able to supply nickel suggests the Tesla CEO would rather not start his own mining division, subtle clues indicate that he is willing to, if needed.

Musk says any bottlenecks along the entire lithium-ion battery supply chain, from mining and refining the metals that go into the batteries powering its EVs and renewable energy storage products to the actual cell manufacturing, will determine the rate that Tesla is able to grow.

"The real limitation on Tesla growth is (battery) cell production at affordable price – that is the real limit," Musk said during a July 22 conference call.

Given the massive global growth in both the EV and renewable energy markets, going straight to the mines for a sustainable, ethical and reliable supply of the nickel, graphite, lithium, cobalt, and manganese that go into Tesla batteries may be a necessity.

Mineral intensive energy

While Tesla can easily expand battery production by simply building more gigafactories and squeezing more efficiencies out of the enormous facilities already in operation, getting the raw materials to these factories could be the challenge.

This is because Tesla is not the only EV and lithium-ion battery company driving massive new demand for nickel, graphite, lithium, cobalt, and manganese. Every major automobile manufacturer on Earth is rolling out new electric and hybrid models, and new players are emerging in both the EV and lithium-ion battery sectors.

World Bank forecasts that the rise of EVs and renewable energy will power a 500% increase in the annual demand for battery minerals over the next three decades.

"In other words, the clean energy transition will be significantly mineral intensive," World Bank posted to the Climate-Smart Mining page of its website.

More information on the World Bank report, ""Minerals for Climate Action: The Mineral Intensity of the Clean Energy Transition," can be read at All clean energy paths lead to mining in the May 13 edition of Metal Tech News.

This coming surge in battery metal demand has auto companies around the globe cutting deals directly with miners to ensure they have reliable supply of these raw materials.

In January, Tesla entered negotiations with global miner Glencore plc for a long-term contract to supply Tesla's Shanghai Gigafactory with cobalt.

Earlier this month, BMW Group secured a deal with Managem Group, a Moroccan mining company, for 100 million euros worth of cobalt needed for the lithium-ion batteries that are powering the German automaker's expanding line of EV models.

"Cobalt is an important raw material for electromobility. By signing this supply contract with Managem today, we are continuing to secure our raw material needs for battery cells," said Andreas Wendt, member of the BMW Board of Management responsible for purchasing and supplier network.

This, along with a previous contract to source lithium from Australian miners, is part of a BMW initiative to ensure its battery materials are mined with the highest environmental and human rights standards.

"For us, ethically responsible raw material extraction and processing starts at the very beginning of the value chain – we take a keen interest in battery cell supply chains that extends all the way down into the mines themselves," said Ralf Hattler, senior vice president purchasing indirect goods and services, raw material, production partner at BMW.

While similar battery metal deals are being negotiated by EV manufacturers around the globe, there have been no reports of automakers getting directly involved in the business of mining ... at least not yet.

"We might get into the mining business. I don't know," Musk said last year. "We'll do whatever we have to, to ensure that we can scale at the fastest rate possible."

"Please mine more nickel"

So far, instead of delving directly into the mining business, the Tesla CEO is leaning on mining companies to supply his gigafactories with affordable and environmentally responsible battery metals.

On July 22, Musk made it crystal clear that Tesla is looking for nickel ... and a lot of it.

"Any mining companies out there ... wherever you are in the world, please mine more nickel," he said.

The Tesla boss urged those miners not to wait for a coming spike in nickel prices to begin ramping up operations.

"Tesla will give you a giant contract for a long period of time if you mine nickel efficiently and in an environmentally sensitive way," he added. "So, hopefully, this message goes out to all mining companies – please get nickel."

If mining companies do not come up with the battery metals needed to sustain Tesla growth, Musk has indicated he is willing to get more directly involved in the mining sector.

The tech executive said vertical integration – where one company becomes involved with two or more stages of production normally operated by separate companies – is extremely important to his growth vision for Tesla.

One of the reasons Musk sees vertical integration as vital to Tesla is his view of complex mines-to-gigafactory supply chain that is inefficient and prone to disruption.

"If you put a GPS tracker on a molecule from when it got mined to when it was in a usable product, it would look insane," he said.

Any traffic jam along this supply chain – whether it be at the mine, refinery, or battery facility – will be a limiting factor for Tesla growth. The other major facet of this expansion is price.

"So, that's why we're going to talk about a lot more about this on Battery Day, because this is a fundamental scaling constraint," said Musk.

Slated to be held in Freemont, California on Sept. 22, Battery Day is an event where Tesla is expected to showcase its batteries and introduce new technologies. And, given Musk's prelude, we are likely to learn a lot more about the company's plans to source the minerals and metals at the front end of its gigafactory supply chain.

Author Bio

Shane Lasley, Metal Tech News

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With more than 16 years of covering mining, Shane is renowned for his insights and and in-depth analysis of mining, mineral exploration and technology metals.


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