Tesla to use Canadian lithium in EV batteries as early as 2023

Tesla will begin using Canadian lithium in its electric vehicle batteries as early as mid-2023 as the automaker turns to a Quebec mine for a relatively local source of the key battery metal.

Piedmont Lithium Inc., which is co-developing the North American Lithium mine near Val-d’Or Que., said Jan. 3 it had signed an amended deal to supply Tesla with 125,000 tonnes of lithium-rich spodumene concentrate from the mine between the second half of 2023 and end of 2025.

The U.S.-based miner and Tesla struck an initial supply agreement in 2020 that relied on a stream of battery-grade lithium from a planned Piedmont mine in North Carolina. The first shipments of lithium were scheduled to start in mid-2022, but Piedmont’s project west of Charlotte remains in the pre-production, permitting phase.

“The electric vehicle and critical battery materials landscape has changed significantly since 2020 and this agreement reflects the importance of — and growing demand for — a North American lithium supply chain,” Piedmont CEO Keith Phillips said in a release.

“This agreement helps to ensure that these critical resources from Quebec remain in North America and support the mission of the Inflation Reduction Act to bolster the U.S. supply chain, the clean energy economy, and global decarbonization.”

Piedmont owns a minority stake in the northwestern Quebec lithium mine and has been working to start up the project with Australia-based partner Sayona Mining Ltd. since the two acquired the idled project in 2021. The companies received the final regulatory nod to begin operations at the site more than 400 kilometres northwest of Montreal in December.

Construction is already underway, and the partners expect to be producing spodumene concentrate by the second half of 2023.

The mine is poised to become the first in a series of Canadian lithium projects to begin feeding the voracious global demand for the key battery metal.

The agreement also strengthens Tesla’s ties to Canadian resources. In May 2022, the EV maker said it had entered a long-term supply agreement with miner Vale for Class 1 nickel, which is another vital ingredient in the EV maker’s longer-range lithium-ion batteries.

Tesla is not alone among auto companies and battery manufacturers locking in supply deals for increasingly scarce battery materials from Canadian mines.

General Motors signed a similar nickel supply deal with Vale in November, while LG Energy Solution signed non-binding agreements with junior lithium miners Avalon Advanced Materials Inc. and Snow Lake Lithium Ltd. in September.

Piedmont’s amended deal with Tesla also introduces a pricing mechanism that will tie the price the automaker pays for the Quebec-sourced lithium to market rates.

David Deckelbaum, an analyst at Cowen & Co., told Bloomberg that the change is significant, as Tesla has typically fixed the prices for the materials it needs for batteries.

“As more contracts shift toward variable pricing, Tesla’s lithium costs inevitably move higher,” Deckelbaum told Bloomberg in an email.

— With files from Bloomberg

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