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Tesla stockholders reject sea moratorium

Metal Tech News - June 25, 2024

Auto manufacturers take sides on the question facing the industry – are deep sea resources necessary to compete in the global EV race?

A proposal to limit the use of minerals pulled from the seabed has been making its rounds in boardrooms from Tesla to GM, asking big names in the electric vehicle game to commit to a moratorium on minerals sourced from the deep sea. It lost in a landslide, with 78% of Tesla shareholders voting against the proposal and 6% in favor.

While commercial deep-sea mining has not officially begun, the potential trillion-dollar industry hangs over successful extraction of polymetallic nodules, potato-sized nuggets loaded with metals used in EV batteries, such as nickel, manganese, and cobalt.

These treasures, called "batteries in a rock" by Gerard Barron, chief executive of deep-sea mining explorer The Metals Company, are possibly the most hotly contested tech metals resource on the planet today.

Found on the seafloor 4,000 meters below the surface of the ocean in deep abyssal plains, they lay scattered like gold in a stream – there for the taking – if anyone can manage to build a machine dexterous enough to pick them up without devastating the seabed.

The Metals Company

Loaded with metals used in EV batteries, potato-sized polymetallic nodules lying on the sea floor have been christened "batteries in a rock" by Gerard Barron, chief executive of The Metals Company.

Tesla behind the eight ball

Activist investors pressed Tesla to join several other industry leaders including BMW, Volkswagen, and Volvo in signing a deep-sea mining (DSM) moratorium in cooperation with the World Wildlife Fund.

"Other countries are more advanced and this is reflected in the way automotive companies operate," said Danielle Fugere, President of As You Sow, a non-profit organization that promotes corporate social responsibility.

The organization submitted the proposal in December asking Tesla shareholders to support a moratorium on the sourcing of deep seabed minerals until more is known about its environmental effects.

In January, Tesla appealed to the U.S. Securities and Exchange Commission (SEC) to omit the moratorium proposal from this year's shareholder meeting, claiming it was an attempt at micromanagement, with senior director and general counsel Derek Windham writing, "The environmental and reputational risks and aspects of the proposal are, at best, secondary to the proposal's ultimate design to micromanage the source of the raw materials used in the company's products and the specific suppliers from which the company may purchase from."

The SEC rejected the request on March 27, allowing the vote to go forward.

"Tesla lags behind its auto manufacturing peers BMW, Polestar, Renault, Rivian, Scania, Volkswagen, and Volvo all of which have supported a DSM moratorium. Several battery manufacturing companies have been proactive in committing to a DSM moratorium as well," As You Sow penned in the resolution posed to Tesla by its activist shareholders.

In the case of rejection, the document requested that the Tesla board "disclose its rationale and assess the company's anticipated need for deep sea materials."

GM sides with Tesla

General Motors investors rejected a similar proposal that would have required the iconic American automaker to publicly disclose any use of deep-sea minerals in its supply chain.

To date, 47 companies and financial institutions have signed the business statement calling for a moratorium on deep seabed mining activities, but the impressive ones are those that would seemingly benefit from seabed mining moving forward but have thus far rejected its temptation.

Corporations including Samsung SDI, Philips, BMW, Microsoft and Google have distanced themselves by excluding deep-sea metals from polices of procurement and investment.

The emerging deep-sea mining industry argues that seafloor mineral extraction is an improvement on damage brought about by land-based mining, and will justifiably accelerate decarbonization, providing the tech metals needed to reach net zero and usher in the global energy transition in time.

However, the real question facing the auto industry may actually be whether deep-sea resources are even necessary to compete in the global EV race, which may be slowing.

Times are changing

Tesla has continued to expand use of lithium iron phosphate (LFP) batteries – as of 2022, leading with almost half of the vehicles it produced containing LFP batteries. LFPs are also popular in China and do not rely on nickel or cobalt.

Gerard Barron is optimistic in this regard.

"I think LFPs are filling a certain segment of the market," he said. "Over the next decade, sodium-based chemistries will become more popular and replace some of the LFP market share. And that will require the metals from our nodules."

Tesla and GM's shareholder votes do come at a pivotal moment in the EV landscape – 2025 will see the global battery industry capable of producing five times more than demand, according to BloombergNEF, with batteries' nickel content also predicted to drop by 25%. Those shifts could make mining the seabed for polymetallic nodules and the like not only environmentally suspect but a potential economic sinkhole.


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