Tesla’s Musk says lithium deal doesn’t rule out Nevada

CARSON CITY — Tesla CEO Elon Musk says criticism from some Nevada lawmakers of its conditional agreement to pursue lithium from a mine in Mexico is unfounded and does not mean the company won't look closer to home for the critical metal.

One expert suggested it's unrealistic to think a single mine could supply enough lithium for Tesla's battery factory.

"No, and I do not think Tesla would want to rely on any one supplier whether they are in Nevada or not," said Edward Anderson, a widely referenced lithium consultant who is president and CEO of TRU Group.

The agreement signed between Tesla and operators of a lithium mine in northern Mexico has some Nevada lawmakers feeling slighted that the California-based electric car maker would go south of the border instead of looking closer to home in the Silver State.

"Lithium deal is not exclusive and has many contingencies. The press on this matter is unwarranted," Musk responded in a tweet late Wednesday.

Tesla's agreement with the Sonora Lithium Project Partners in Mexico contains several conditions, including obtaining financing, meeting performance timelines and passing product specification qualifications, Canada-based Bacanora Minerals said in a news release when the agreement was announced.

When state lawmakers approved $1.3 billion in tax incentives during a special session a year ago, there was buzz that Tesla's huge battery factory would invigorate Nevada's lithium mining industry.

So when the Wall Street Journal reported Tesla inked an agreement last week with Bacanora and London-based Rare Earth Minerals to provide lithium for the $5 billion battery plant being built in the Tahoe-Reno Industrial Center east of Reno in Storey County, it raised some hackles.

"I can't say that Tesla intentionally misled us, but if we're the lithium capital of the world why are they going to Mexico?" said state Sen. Tick Segerblom, D-Las Vegas. Though in hindsight, he conceded, a lot of the lithium hype may have been speculation.

The incentive package unanimously approved by lawmakers requires Tesla to invest at least $3.5 billion in the state and hire Nevada workers. It does not stipulate where the company must get any of its materials for battery production.

Globally, Chile and Argentina are the top lithium chemical producing countries, followed by China, Anderson said. Silver Peak mine in central Nevada, now owned by Louisiana-based Albemarle Corp., is the only active lithium operation currently in the U.S. Representatives of Albemarle did not immediately respond to requests for comment.

Anderson said Silver Peak is approaching the end of its lifespan, but Albemarle has other lithium operations in Chile.

"As the mine runs out Albemarle could increase its imports of lithium intermediate chemicals and for use in Nevada final products," Anderson said. "That is why I think that operation will remain important for quite a while."

Western Lithium Corp., headquartered in Vancouver, British Columbia, has been working on developing a lithium operation in Northern Nevada's Humboldt County for the past six years but it's still a few years away from targeted production, said President and CEO Jay Chmelauskas, who declined to say if Western was in talks with Tesla.

"We don't comment on any corporate activity that we're involved with," Chmelauskas said.

But he said demand for lithium continues to grow and he is optimistic of the company's pursuits.

"It's a global market and there will be multiple supply sources and there will be multiple customers," he said.

Chmelauskas said annual global production has increased from 120,000 tons in 2008 to around 180,000 tons today. "We're looking at a lithium market over next 5-10 years that will require another 150,000 tons to 250,000 tons of lithium carbonate per year," he projected.

In comparison, he said, "Our project in Nevada is about 26,000 tons."

Last month the company entered an agreement with Posco, a South Korean company, to develop a lithium project in Argentina.

"It's a big world," Chmelauskas said. "There's a lot more to come in this market."

Contact Sandra Chereb at schereb@reviewjournal.com or 775-687-3901. On Twitter: @SandraChereb