It may go into mining to help solve the shortage of key raw materials in rechargeable lithium-ion electric vehicle batteries.
Tesla-as-miner has far-reaching implications for the electric car industry. Will shutting down long-term lithium supplies become a strategic imperative for the industry? Will other car companies look to merge into EV battery supply chain? These are long-term questions that investors should consider. Immediately, lithium mining stocks – likely smaller ones – could react significantly in Monday’s trading.
The biggest and most established players include
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t (LTHM) and
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It still qualifies as mini stock.)
Three smaller players include
The combined market capitalization of the Big Three players is over $50 billion. The three smaller players, who are in various stages of ramping up new ventures, have a combined market cap of less than $10 billion.
“The price of lithium has gone to insane levels!” Musk tweeted on April 8.
He has a point. Standard lithium prices are around $78,000 per metric ton, up nearly 80% since the beginning of the year. The price of a basket of raw materials for batteries Baron Tracks are up about 60% YTD, in theory Almost $2000 EV price.
However, most battery materials are purchased under contracts. Most of the commodity prices shown are spot prices. When the spot price is greater than the contract, this is a sign that the contract prices will move higher.
“Tesla may have to go into mining [and ] “Live refining at scale,” Musk said, adding in a later tweet, “We have some great ideas for sustainable lithium extraction.” [and] revision.”
Scale doesn’t seem to be the big problem. There are large miners like Albemarle that are producing lithium for less than $10,000 a metric ton, according to company documents and Baron mathematical calculations. Moreover, everyone invests in the lithium industry in order to grow. Wall Street expects Albemarle’s capital spending to be around $1.4 billion in 2022, more than double the levels just a few years ago.
The current spot prices are good enough for miners to put capital into the ground. Instead, the problems appear to be related to the growth in demand for electric vehicles, which is happening faster than people, and the time it takes for the mining industry to ramp up new capabilities.
Lithium miners appear to be slightly behind the growth curve.
Tesla (TSLA) has already made strides in the industry, working with Piedmont. Tesla agreed to take production from the start Back in 2020. This deal sent Piedmont stock up more than 230% on the day it was announced.
However, in that deal, Piedmont will do the mining. Musk might be happy to take that company’s lithium. He just wants more.
Rates for the three smaller lithium mining are up about 33% on average since the start of the year, driven by higher commodity costs. All three stocks fell on Friday with
Shares in the other three miners are up 20% so far on average. All three of these stocks fell on Friday, too.
Write to Al Root at [email protected]
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