Elon Musk, the founder of Tesla Motors, has struck a long-term supply deal with an AIM-listed miner as part of a scramble to secure lithium for electric car batteries.
The billionaire technology entrepreneur is building a 10 million sq ft battery factory near Reno, Nevada, which will be used to supply batteries for Tesla’s electric vehicles and its home electricity storage systems.
The carmaker has been looking for lithium suppliers big enough to cater for its factory’s demands — its Model S electric car uses about 7,000 lithium-ion batteries and Mr Musk has announced plans to produce about 500,000 cars a year by 2020.
Goldman Sachs has said that Tesla Motors may use as much as 17 per cent of the world’s lithium supply once its factory reaches full capacity.
Bacanora Minerals and Rare Earth Minerals have agreed to supply lithium hydroxide from their Sonora project in northern Mexico to the Californian company for the next five years, starting from Tesla’s first order, with the option to extend the deal for another five years.
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News of the deal helped to push shares in the London and Canadian-listed Bacanora up by 24 per cent yesterday to 86½p, while shares in Rare Earth, which was established to invest in rare earth projects across the world, rose 18 per cent to 1.06p.
The deal marks a giant step for the Sonora project, with analysts at WH Ireland calling it “a vote of confidence in the project”.
Bacanora and Rare Earth said that the deal was subject to the project reaching certain performance milestones over the next two years.
Colin Orr-Ewing, the chairman of Bacanora, said that the supply deal represented a “vital and monumental step forwards in the commercialisation of the large lithium resources that the company holds, together with its partner REM, in northern Mexico.
“We anticipate this contract to rapidly accelerate the development of the Sonora Lithium Project, which we expect will prove to be invaluable in an increasingly lithium-hungry world.”