Core Lithium appears to have walked away from a mooted deal with Elon Musk’s Tesla amid the global scramble to lock in supply of the battery making material.
The emerging lithium miner’s shares tumbled in early trading on Thursday, dropping as much as 10 per cent to an intraday low of $1.31, after the company said it had failed to agree terms with Tesla, but recovered in afternoon trading, down 6.5c to $1.385.
Core and Tesla have been in talks over the details of a “binding” term sheet for the supply of 110,000 tonnes of lithium concentrate since early March, as part of a suite of deals the electric carmaker was looking to cut with Australian suppliers to lock in battery making materials.
Those talks were extended in late August, but Core said on Thursday a final deadline to agree terms had now passed without an agreement being reached.
Lithium producers and near-term developers have been reporting overwhelming interest from potential buyers of lithium concentrate over the last year.
Pilbara Minerals boss Dale Henderson told analysts on the company’s September quarter production call this week that would-be customers were trying to “beat down the door” to get access to cargoes. “The phone won’t stop ringing. Yes, my phone is set to silent,” he said.
Amid that level of extraordinary interest in accessing lithium concentrate in a tight market, it is understood that Core walked away from the talks with Tesla after the two companies failed to agree to pricing and terms for a four year supply deal.
Core chief executive Gareth Manderson noted the company had sold a 15,000 tonne shipment of direct shipping ore grading only 1.4 per cent lithium in early October for a $US951 a dry metric tonne, underlining the severe shortage of lithium in the market.
Mr Manderson said the company still had still locked in sales for 80 per cent of the concentrate it expected to produce in the first four years of its newly opened Finniss lithium mine.
“The recent DSO sale, predicted commencement of lithium concentrate sales in the first half of 2023 and an increasing lithium price environment indicate that Core Lithium is well positioned to capitalise on the high demand and current shortage of available battery grade lithium spodumene concentrate,” he said.
Tesla is only one of a group of major car manufacturers scrambling to lock in supplies of battery making materials ahead of predicted market shortages later in the decade. This month auto-making giant GM announced it would sink an initial $US20.1m into Queensland Pacific Metals to help secure supply of the commodity into the future.
In July, Ford announced it had cut new early stage supply deals with a swath of Australian miners, from Rio Tinto and BHP to emerging producers such as Ioneer and Syrah Resources, having already agreed to help fund Liontown’s Australian lithium mine with a $300m debt facility.
The scramble to secure battery making materials is particularly acute for US manufacturers, who risk missing out on $US7500 electric vehicle tax credits on offer from the Biden administration if they do not source the critical minerals for their batteries either from within the US, or from countries with a free-trade agreement with the US – such as Australia.
Mr Manderson signalled Core was still prepared to consider a deal with Tesla in the future, saying the company looked forward to “maintaining an open and ongoing dialogue” with the Elon Musk-led company.
Enough talk about the poor communication delivery , “from what I’ve been told” Bruce eluded to being inundated with requests for off takes within the US and is electing to wait and hold off for the best price , for me this is a great strategy, many miners with early offtakes maybe lamenting some of those deals in the future . As I’ve said in the past Burnvoir helped PLS get funding over the line and provided advice to PLS culminating in the current BMX auctions and I still believe with ASN appointment of Burnvoir that this is also in the cards for ASN and the main driver I believe is the need for around $2billion - $3billion in CAPEX to completely “monetise” the Paradox Project . In keeping with this theme and as you know I hold other Lithium stocks I came across a recent article over at CXO it’s not an attempt to cross promote I’m posting it in light of the reasoning for why the CXO-Tesla deal broke down and the state of the burgeoning Lithium battery space in the US as for CXO the deal was only a small deal anyway 20% of production for 4 years which now will more than likely go to spot market via more BMX style auctions ! Anyway my view is that there are a lot of ASN SH on HC that are not in it for the long hold which I was 1 but the more it progresses the more I’m in it till the end ! Warmest Regards TT
