Tesla heads to the mines for its batteries

Tesla Inc. needs an increasing amount of lithium, graphite, nickel and cobalt for the lithium-ion batteries that power its growing lineup of electric vehicles.

With its own rapid expansion, coupled with every major automotive brand in the world adding increasing numbers of EV models to their lineups, securing sustainable and ethical supplies of the lithium, cobalt, graphite, and nickel that go into the batteries that power these zero-emission automobiles has become crucial.

According to the 2019 World Bank study – Climate-smart mining: Minerals for climate action – EVs and other low-carbon technologies are forecast to drive up the demand for lithium by 965 percent, cobalt by 585 percent, graphite by 383 percent and nickel by 108 percent over the next three decades.

This has the mining sector scrambling to discover, permit and develop new sources of these battery metals.

This also has carmakers and battery manufacturers looking to ensure that they have plenty of the raw materials that they need, while at the same time ensuring their customers those materials come from mines and regions that are environmentally responsible and do not abuse human rights.

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

While there are no reports that Musk has deployed his boring machine to mine the minerals and metals that go into lithium-ion batteries, Tesla and other automakers are making deals with miners to ensure a reliable and sustainable source of these materials.

Glencore cobalt

In mid-January, Bloomberg reported that Tesla is in talks to buy cobalt from Glencore plc, the world's largest producer of this battery metal.

"Glencore Plc is negotiating a long-term contract to ship cobalt to Tesla Inc.'s new electric-vehicle factory in Shanghai, according to people familiar with the matter," Bloomberg inked in its report.

Securing cobalt from reputable suppliers has become critically important for EV and lithium-ion battery manufacturers.

According to the U.S. Geological Survey, the Democratic Republic of Congo (DRC), a country considered politically and socially unstable, supplied more than 60 percent of the world's new cobalt supply during 2018.

"This country has a high-risk index for doing business owing to poor infrastructure, resource nationalism, a high perception of corruption, and a lack of transparency as well as wars," USGS wrote about DRC in a 2018 report on cobalt.

This creates a dilemma for electric automobile manufactures and their customers.

While Amnesty International believes EVs have an important role to play in curbing climate change, they are urging carmakers to consider the human costs associated with the cobalt that goes into these vehicles.

"Without radical changes, the batteries which power green vehicles will continue to be tainted by human rights abuses," said Amnesty International Secretary General Kumi Naidoo.

Coupled with pressure from socially conscious EV drivers, this call for ethical batteries has automobile and lithium-ion battery manufacturers looking for solutions, including less cobalt-intensive recipes for cathodes.

Tesla, which sold roughly 367,500 cars and dominated the U.S. luxury vehicle market during 2019, is among the EV manufacturers developing cathode chemistries that require less cobalt.

"Cells used in Model 3 are the highest energy density cells used in any electric vehicle," Tesla CEO Elon Musk penned in a 2018 letter to shareholders. "We have achieved this by significantly reducing cobalt content per battery pack while increasing nickel content and still maintaining superior thermal stability."

While Tesla and other rechargeable battery manufacturers are looking at ways to further reduce the amount of cobalt, researchers and analysts do not see a scenario where the reduction of cobalt per battery can come close to offsetting the growing number of batteries that will be needed in the coming three decades.

"Cobalt is a critical safety component of the lithium-ion battery, and while auto makers are seeking to reduce their consumption of this mineral, it is our opinion that cobalt will not be engineered out of a lithium-ion battery in the foreseeable future," Benchmark Mineral Intelligence Managing Director Simon Moores penned in a 2019 written testimony to the U.S. Senate Energy and Natural Resources Committee.

With Tesla reportedly inking a deal with Glencore for cobalt, it seems that Tesla agrees that at least some cobalt will continue to be needed in coming generations of the batteries powering its cars and Cybertrucks.

North American graphite

With world production of lithium-ion batteries on the rise, it is likely that Tesla will cut deals to secure stable, ethical and environmentally sound sources of other battery metals as well.

Graphite is one of the mined materials EV and lithium-ion battery companies will be vying over in the near future.

While graphite demand is not expanding as rapidly as lithium and cobalt, this has more to do with the graphite market being larger than the other mined materials prior to the onset of the EV market boom.

In 2017, global graphite production was around 1.2 million tons. This is more than ten times the 110,000 tons of cobalt and roughly 28 times the 43,000 tons of lithium produced that same year.

So, while the percentage growth of graphite is less than cobalt or lithium, the tonnage is much higher. By 2050, the green energy and EV sectors are expected to push the cobalt demand to nearly 4.6 million tons per year.

According to Mineral Commodity Summaries 2019, an annual USGS report, China produced roughly 68 percent of the world's mined graphite in 2018. The next closest graphite producer was Brazil at about 10 percent, followed by Canada and India, each at about 4 percent.

When it comes to spherical graphite, a special form of the material used as the anode in lithium-ion batteries, China was the only commercial-scale producer in 2018.

Gigafactory 1, an enormous lithium-ion battery facility in Nevada that is producing the batteries going into the cars coming off Tesla's North America assembly-lines, is going to need hefty supplies of spherical graphite.

Once complete, this 10-million-square-foot plant in Nevada is expected to be able to manufacture enough batteries for roughly half a million Tesla's per year and is going to need around 35,200 tons of spherical graphite per year. This does not account for Gigafactory 2 (New York), Gigafactory 3 (China), Gigafactory 4 (Germany) or the multitude of other lithium-ion battery facilities being developed around the globe.

And each of these facilities are going to need, preferably regional, supplies of graphite and the other lithium-ion battery materials.

While Tesla has not cut any deals with miners for its North America Gigafactories – the Glencore cobalt is expected to be destined for Gigafactory 3 in Shanghai – there have been hints that it or some other EV company is looking to get future supplies of graphite from a world-class deposit Graphite One Inc. is looking to develop in Alaska.

With more than 8 million metric tons of graphite outlined so far, the Graphite Creek deposit could provide a significant and steady North American graphite source for decades.

Extensive testing has shown that the Graphite Creek graphite has distinctive characteristics that make it a particularly good fit for use as an anode material in lithium-ion batteries and other high-tech applications.

Graphite One has coined the term STAX, an acronym to describe the spheroidal, thin, aggregate and expanded graphite found in the Graphite Creek deposit.

Preliminary tests found that more than 74 percent of the STAX flake graphite could be turned into spherical graphite without milling.

This has captured the attention of at least one yet-to-be-named EV car maker in the U.S. that is testing this graphite.

"Electric vehicle manufacturers are beginning to understand that their continued progress is tied to reliable access to quality EV battery materials, including coated spherical graphite from natural graphite, a major component in the anode of lithium-ion batteries," said Graphite One CEO Anthony Huston.

While Graphite One has not disclosed who this EV car maker is, Tesla is definitely on the short list of possibilities.

Plentiful nickel, lithium

There are currently plentiful supplies of nickel and lithium, though for different reasons.

Nickel is widely used and mined around the world, including in Canada, Australia and the United States. So, while the increased demand from batteries is welcomed by nickel miners, meeting that demand should not be difficult.

Lithium, on the other hand, had a very small market before the advent of lithium-ion batteries. And, while these batteries actually only contain around 2 percent lithium by weight, the volume of batteries needed is creating an explosion for the previously small market.

According to World Bank, the lithium market is expected to skyrocket from 43 tons in 2017 to 415 tons in 2050, or nearly a 10-fold increase.

Miners have already been quick to respond to expected demand of the lithium-ion battery's namesake metal and have outpaced demand with supply.

Taking advantage of this supply-demand paradigm, along with the lower prices that go with it, luxury German automaker BMW Group recently secured a five-year supply of lithium for its coming EV models by purchasing this battery ingredient directly from mines in Australia.

"In this way, the BMW Group is securing 100 percent of its lithium hydroxide needs for fifth-generation battery cells in its high-voltage batteries," said Dr. Andreas Wendt, member of the BMW board responsible for purchasing.

Wendt said BMW plans to have 25 electrified models in its line-up by 2023, more than half of which will be fully electric.

"Our need for raw materials will continue to grow accordingly," he said. "By 2025, for lithium alone, we expect to need about seven times the amount we do today."

As markets for lithium-ion battery materials continue to tighten, and EV and green energy consumers demand ethically and environmentally responsible materials, we can expect more battery and automobile companies ensuring their supplies by going straight to the mines to for battery minerals and metals.

More information on lithium, including global supplies and the BMW deal, can be found in Plenty of lithium to go around for now in the Jan. 15 edition of Metal Tech News.

Author Bio

Shane Lasley, Metal Tech News

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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