Tesla Inks Lithium Supply Deal With Piedmont, May Buy 10% Stake In LG Energy
At CleanTechnica, our motto when it comes to Tesla is “All the news that fits, we print.” Some of you may recognize that as a humorous restatement of the tag line used for decades by the New York Times. Today, there are two tidbits about Tesla we want to share with you.
First, Tesla reportedly has signed a 5 year fixed price binding purchase commitment for spodumene concentrate — aka SC6 — which is a precursor to the lithium used to manufacture lithium ion batteries. The agreement has some flexible terms. First deliveries are expected to begin between July 2022 and July 2023. SC6 sales are expected to generate up to 20% of Piedmont’s total revenues from its proposed integrated mine-to-hydroxide project for the initial five-year term.
Keith Phillips, CEO of Piedmont Lithium, tells Seeking Alpha, “We will now accelerate our mine/concentrator development to support Tesla’s plans, work to further expand our mineral resources, and potentially increase our planned annual spodumene concentrate production capacity. We will simultaneously be advancing our plans to produce lithium hydroxide in North Carolina, using a combination of internally produced spodumene concentrate as well as material sourced from other producers around the world.”
Reuters reports the agreement implies Piedmont will supply Tesla with about a third of the 160,000 tons per year of spodumene concentrate it plans to produce from deposits in North Carolina. Both companies have an option to extend the deal for another five years and apparently Tesla can request additional supplies of SC6 from Piedmont during the course of the agreement.
Tesla May Buy Stake In LG Energy Solutions
Earlier this month, LG Chem suggested it could spin off its lithium ion battery business into a separate business called LG Energy Solutions this December in order to raise money to continue its quest to be the largest battery supplier in the world. According to Forbes, it expects establishing the new business entity will bring in about $11 billion, money that would be used to expand battery production. The company says it will need to invest about $2.5 billion a year between now and 2024 to continue that growth.
In July, we reported that Tesla had increased its order for lithium ion batteries from LG Chem significantly. Now The Korea Times reports it has learned from a confidential source that “Tesla is looking to acquire a stake in LG Energy Solution. Specifically, Tesla is said to be exploring taking up to a 10 percent stake in LG Energy Solution.” The source adds, “Given Tesla’s growing attempts at cost cuts and moves in producing round batteries, it does make sense that Tesla would explore an opportunity to buy a stake in LG Energy Solution.”
Since the earliest days of the EV revolution, automakers have debated whether they wanted to make their own batteries or depend on outside suppliers. There is no clear answer to that question, as both come with potential risks. Tesla may be finding a third way forward by developing its own battery technology in cooperation with researchers like Jeff Dahn at Dalhousie University and taking an equity position in suppliers like LG Energy Solution. Daimler once invested in Tesla and would have profited handsomely if it had hung onto its shares a few years longer.
LG says it expects the valuation of LG Energy Solution to be closer to $24 billion by 2024, so Tesla could realize a nice gain on its investment while having a say in the battery production side of things at the same time. That could be a clever way of bridging the battery supplier versus battery consumer divide.
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