What Tesla & Cobalt Mining In Canada Have In Common

September 22, 20204 years ago Industry Sponsor 0 Comments

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In a recent CleanTechnica article by Director Zachary Shahan, he wrote that some of the main challenges that face EV manufacturers are specifically around securing a supply chain for their EV battery manufacturing. While it is clear that EVs need efficient batteries, it is not as well known that it also takes one or two years to get a battery production plant up and running, just ask industry leader Tesla.

What Exactly Creates a Battery?

Something that is often forgotten is that companies do not make batteries out of thin air. Before the battery production process, an EV battery manufacturer has to produce the components of the batteries, like the cathodes, and therefore has to buy the compounds that go into the cathodes, such as commercial grade lithium and cobalt. Before any of that, a mining company needs to mine these raw minerals and an exploration company needs to find these same key raw minerals.

The challenge that the industry is facing is that it takes at least 5–7 years for a mine to be operational. Further complicating the situation is that for the past decade investment in mining has decreased.

Furthermore, there is a growing push from Tesla (NASDAQ: TLSA), Volkswagen (FRA: VOW3), and others for the mining output to increase, and this causes a disconnect in the overall supply/demand equation.

Recently, the prices of lithium and nickel have been low because of temporary oversupply. The problem is that battery makers and automakers like Tesla are looking this deeply into the supply chain, and current projections include these same low prices going forward. However, when prices are low because of recent oversupply, but then demand picks up, this results in higher prices again.

On June 16, 2020 the Financial Post published an article entitled “Tesla strikes a deal to buy cobalt from Glencore ahead of future supply squeeze.” Authors David Stringer and Thomas Biesheuvel discussed several key observations of a recently signed cobalt supply contract between two corporate giants, Tesla Inc., a market leader in the electric vehicle (EV) industry, and Glencore plc (LSE:GLEN), to provide up to 6,000 tons of cobalt annually to Tesla for its EV lithium-ion battery production needs which it will use to manufacture batteries for its planned 650,000 EVs built at its Berlin (Germany) and Shanghai (China) production facilities.

Which Companies are Working to Provide the Minerals for EV Batteries?

FUSE* is a Canadian-based mineral exploration company focussed on the exploration of high value metals required for the manufacturing of batteries, specifically cobalt and lithium. FUSE (TSXV: FUSE, OTCQB: FUSEF FRA:43W3) has recently been restructured and refinanced and is exploring for key metals that are critical for the EV battery production.

Of note, FUSE also has a long-term business relationship with Glencore plc (LSE: GLEN) having purchased the Glencore Bucke Cobalt property from them, in addition to owning the adjoining Teledyne Cobalt property, which is 10 times larger. In addition to this large land position that is 100% owned, FUSE’s cobalt properties are located in the historic cobalt mining region of Cobalt, Ontario, Canada, only 5 km away the Glencore funded cobalt refinery. These FUSE-owned cobalt properties have three distinct commercial supply agreements with Glencore, namely a back-in provision, a production royalty and an off-take agreement.

Mr. Robert Setter, FUSE President & CEO, comments “FUSE is in a great position to capitalize on this EV industry vertical integration, with its existing ramp infrastructure in place on the Teledyne and Glencore Bucke cobalt properties. It would cost over $25 million today to recreate this infrastructure which is a huge benefit to our shareholders. This, together with the close proximity to an experienced mining labor force and nearby North America’s only permitted cobalt mill & refinery will make us very attractive as an EV vertical integration partner.”

Mr. Setter continues, “Strategically, FUSE’s Canadian cobalt properties cover the southern extension of the former producing 15 Vein on the past-producing Agaunico Mine Property. Historically, the Agaunico Mine produced 4,350,000 lb of cobalt and 980,000 oz. of silver during the mining boom of the early 1900’s (Cunningham-Dunlop, 1979). Not that long ago, past drilling results on the Ontario cobalt properties revealed intersections of 21.9% cobalt over 0.36 metres and 18.7% cobalt over 0.15 metres at the Teledyne Cobalt property (News Release Jan 18, 2018), and intersections of 8.42% cobalt over 0.30 metres on the Glencore Bucke property (News Release Jan 17, 2018).”

The future for FUSE looks bright. The company has found these key minerals of cobalt and lithium in Canada, which is both a mining and business friendly area of the world. The company is actively involved in working and partnering with large companies like Glencore plc to serve the demand from their many EV-industry customers, like Tesla, which is making vehicles that are highly sought after by people around the world.