Lithium producer Livent says it has extended its supply contract with Tesla to 2021. Tesla wants Livent to provide higher quantities than in 2020 and a new lithium mine is to help in this respect but is fraught with risks.
The news came as part of Livent’s third-quarter results, which failed to give exact volumes of the agreement. The statement speaks of a one-year extension and Livent added that it was discussing the framework for a long-term supply partnership with Tesla beyond 2021.
At the same time, the Philadelphia-based lithium producer also announced its intention to join a Canadian lithium project as part of a consortium with the aim to acquire Nemaska Lithium Inc. (“New Nemaska”) . This would give Livent access to additional resources to supply larger quantities of lithium hydroxide to its customers. So far, Livent has been sourcing its lithium from a brine plant in northern Argentina.
However, there are also risks at Nemaska. According to the specialist portal Mining.com, operating costs are quite high also due to complex mining in adverse weather conditions. In 2019, Nemaska was 300 million dollars above the calculated operating costs and as a result, had to file for bankruptcy. The company had previously supplied Lithium hydroxide to LG Chem.
Also Livent was already not profitable in the past quarter, despite the increasing demand for lithium. In the results, Livent mentions the sustained lithium pricing weakness which had forced many developers and producers to defer or cancel new projects and expansions, creating a potential shortage of battery qualified lithium materials in the coming years.
At the same time, “We continue to see evidence that demand for lithium compounds will accelerate in 2021 and beyond, with growing support for electrification from OEMs, governments and consumers, despite significant disruptions in 2020,” said Paul Graves, president and chief executive officer of Livent.
With quarterly revenues of $72.6 million, the company recorded a GAAP net loss of $11.8 million. “Third quarter results reflected the continuation of difficult market conditions for both Livent and the lithium industry as a whole, as global supply chains remain disrupted as a result of COVID-19,” the company states. Still, Livent’s third-quarter revenues were higher than in the second quarter due to an increase in lithium hydroxide volumes.
At Tesla, there will certainly be no shortage of demand and other raw materials as they gear up to deliver half a million electric cars this year. The company has begun sourcing as locally as possible and said as much on Battery Day and subsequent earning calls. In North America, Giga Metal had been on the list of potential suppliers reportedly with Brazil’s Vale mining company that followed suit to supply Nickel from a mine in Canada. Vale has nickel production facilities in three Canadian provinces. The Voisey’s Bay operation is to be converted to underground mining and will produce 40,000 tonnes of nickel concentrate per year.
Elon Musk had repeatedly called for Nickel. At the same time, the Tesla boss put expectations into perspective, when adding that they “don’t want to be constrained by nickel availability”. Instead, there’s a three-tier approach with high nickel cells for the Semi and Cybertruck, with a 2/3 nickel and 1/3 manganese mix for “intermediate solutions,” that’s cars and the lithium ion mix for stationary energy solutions like the Tesla Powerwalls.
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