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Lithium war heats up after Tesla Model 3 launch

By James Stafford

Published 20/04/2016

The Model 3 will cost 35,000 dollars (£24,423) and have a range of at least 215 miles (346km) per charge, the company's chief executive, Elon Musk, said. PA
The Model 3 will cost 35,000 dollars (£24,423) and have a range of at least 215 miles (346km) per charge, the company's chief executive, Elon Musk, said. PA
Customers wait in line to put a USD 1,000 deposit on the as yet unseen Tesla Model 3, outside the Tesla store on the Third Street Promenade in Santa Monica, California, on March 31, 2016. / AFP PHOTO / ROBYN BECKROBYN BECK/AFP/Getty Images
Customers wait in line to put a USD 1,000 deposit on the as yet unseen Tesla Model 3, outside the Tesla store on the Third Street Promenade in Santa Monica, California, on March 31, 2016. AFP/Getty Images
Customers wait in line to put a USD 1,000 deposit on the as yet unseen Tesla Model 3, outside the Tesla store on the Third Street Promenade in Santa Monica, California, on March 31, 2016. / AFP PHOTO / ROBYN BECKROBYN BECK/AFP/Getty Images
Customers wait in line to put a USD 1,000 deposit on the as yet unseen Tesla Model 3, outside the Tesla store on the Third Street Promenade in Santa Monica, California, on March 31, 2016. / AFP PHOTO / ROBYN BECKROBYN BECK/AFP/Getty Images
Customers wait in line to put a USD 1,000 deposit on the as yet unseen Tesla Model 3, outside the Tesla store on the Third Street Promenade in Santa Monica, California, on March 31, 2016. / AFP PHOTO / ROBYN BECKROBYN BECK/AFP/Getty Images
Customers wait in line to put a USD 1,000 deposit on the as yet unseen Tesla Model 3, outside the Tesla store on the Third Street Promenade in Santa Monica, California, on March 31, 2016. / AFP PHOTO / ROBYN BECKROBYN BECK/AFP/Getty Images
Customers wait in line to put a USD 1,000 deposit on the as yet unseen Tesla Model 3, outside the Tesla store on the Third Street Promenade in Santa Monica, California, on March 31, 2016. / AFP PHOTO / ROBYN BECKROBYN BECK/AFP/Getty Images
This undated photo provided by Tesla Motors shows the Model 3 car. The promise of an affordable electric car from Tesla Motors had hundreds of people lining up to reserve one. At a starting price of $35,000 before federal and state government incentives the Model 3 is less than half the cost of Tesla's previous models. (Tesla Motors via AP)
This undated photo provided by Tesla Motors shows the new Model 3 car. The promise of an affordable electric car from Tesla Motors had hundreds of people lining up to reserve one. At a starting price of $35,000 before federal and state government incentives the Model 3 is less than half the cost of Tesla's previous models. (Tesla Motors via AP)
This undated photo provided by Tesla Motors shows a silver Model 3 car. The promise of an affordable electric car from Tesla Motors had hundreds of people lining up to reserve one. At a starting price of $35,000 before federal and state government incentives the Model 3 is less than half the cost of Tesla's previous models. (Tesla Motors via AP)
A handout photo provided on April 1, 2016 by Tesla Motors shows the car manufacturer's new Model 3 which was unveiled on March 31, and is scheduled to hit the market late next year. AFP/Getty Images
Tesla Motors unveils the new lower-priced Model 3 sedan at the Tesla Motors design studio Thursday, March 31, 2016, in Hawthorne, Calif. It doesn't go on sale until late 2017, but in the first 24 hours that order banks were open, Tesla said it had more than 115,000 reservations. Long lines at Tesla stores, reminiscent of the crowds at Apple stores for early models of the iPhone, were reported from Hong Kong to Austin, Texas, to Washington, D.C. Buyers put down a $1,000 deposit to reserve the car. (AP Photo/Justin Prichard)
A woman looks into the Tesla store in Santa Monica, California, where customers are waiting in line to put a USD 1,000 deposit on the as yet unseen Tesla Model 3, on March 31, 2016. / AFP PHOTO / ROBYN BECKROBYN BECK/AFP/Getty Images
A man looks into the Tesla store in Santa Monica, California, where customers are waiting in line to put a USD 1,000 deposit on the as yet unseen Tesla Model 3, on March 31, 2016. / AFP PHOTO / ROBYN BECKROBYN BECK/AFP/Getty Images
A man looks into the Tesla store in Santa Monica, California, where customers are waiting in line to put a USD 1,000 deposit on the as yet unseen Tesla Model 3, on March 31, 2016. / AFP PHOTO / ROBYN BECKROBYN BECK/AFP/Getty Images
Customers wait in line to put a USD 1,000 deposit on the as yet unseen Tesla Model 3, outside the Tesla store on the Third Street Promenade in Santa Monica, California, on March 31, 2016. / AFP PHOTO / ROBYN BECKROBYN BECK/AFP/Getty Images
A salesrep (L) helps a customer pre-order the as yet unseen Tesla Model 3, in the Tesla store on the Third Street Promenade in Santa Monica, California, on March 31, 2016. / AFP PHOTO / ROBYN BECKROBYN BECK/AFP/Getty Images
A salesrep (L) helps a customer pre-order the as yet unseen Tesla Model 3, in the Tesla store on the Third Street Promenade in Santa Monica, California, on March 31, 2016. / AFP PHOTO / ROBYN BECKROBYN BECK/AFP/Getty Images
A salesman (2R) help customers pre-order the as yet unseen Tesla Model 3, in the Tesla store on the Third Street Promenade in Santa Monica, California, on March 31, 2016. / AFP PHOTO / ROBYN BECKROBYN BECK/AFP/Getty Images

The unveiling of Tesla’s Model 3 electric car was no less than the lifting of the final curtain on a game-changing energy revolution. And if we follow that revolution to its core, we arrive at lithium — our new gasoline for which the feeding frenzy has only just begun.

Unveiled just on 31 March and already with 325,000 orders, it seems that the market, too, understands that the Model 3 is more than just another electric vehicle. In one week alone, Tesla has racked up around $14 billion in implied future sales, making it the “biggest one-week launch of any product ever.” (And if you think the “implied future sales” negates the news, think again: Each order requires a $1,000 refundable deposit.)

It will change the world because it is the first hard indication that the tech-driven energy revolution is not only pending, it’s arrived. The Model 3 and its stunning one-week sales success — apparently achieved without advertising or paid endorsements--brings the electric car definitively into the mainstream, and there is no turning back now. Competitors will step up their game and the electric vehicle rush will be in full throttle — so will the war to stake out new lithium deposits.

If we reverse engineer the Model 3, we find lithium--the heart and soul of the energy revolution. While everything else is suffering from low prices and a supply glut, lithium is facing the over-charged demand, which opens a huge window of opportunity for new producers.

The Model 3, all by itself, will have a huge impact on lithium demand, which is already threatening to make supply impossible without exploration and production of new resources. At the end of the day, Tesla’s “huge step towards a better future” achieved by fast-tracking “the transition to sustainable transportation” comes down to lithium.

The lithium space is becoming a frantic game of who can get their hands on the choicest new mining acreage and who can launch new production fastest. And in North America, it’s all going down in the state of Nevada, which is the staging ground for a U.S. lithium boom that will feed the manufacturing beasts for everything from EVs, battery gigafactories, powerwalls and energy storage solutions to the long and growing list of consumer electronics that we use every day.

It is no less than a global scramble to secure new lithium supplies. Even before Tesla unveiled the Model 3 to smashing success, Goldman Sachs was predicting that for every 1% rise in EV market share, lithium demand would rise by 70,000 tons per year, and that overall, the lithium market could triple in size by 2025 just on the back of electric vehicles.

To ensure the success of its electric vehicles, Tesla is building a battery gigafactory just outside of Reno, Nevada, and it’s hoping to have enough lithium to make enough batteries to power 500,000 cars by 2020, according to Fortune magazine. Logically, it’s hoping to be able to source that lithium from Nevada as well, and all the new entrants into the lithium space are hungry to be put on Tesla’s future supplier list. But first they have to get it out of the ground.

All of this has made a previously dusty and unattractive area of Nevada—Clayton Valley—one of the most important and significant places in America. But Clayton Valley may just be the beginning.

According to Malcolm Bell, advisory board member and head of acquisitions for Nevada Energy Metals, Nevada may have a lot of fault traps outside of Clayton Valley with potential lithium deposits “hiding in plain sight”.

Graphic shows the four electric cars that Tesla Motors has built to date, including vital statistics
Graphic shows the four electric cars that Tesla Motors has built to date, including vital statistics

“The lithium business is not a flash in the plan; it is here to stay, and I am looking at it like the start of the oil boom in the U.S. when there were oil rigs and derricks nearly every 50 feet,” industry veteran Bell told Oilprice.com. And Nevada Energy Metals understands that lithium is exactly the mineral that is powering our future.

“Thanks to visionaries like Elon Musk, who has turned the transportation industry on its ear, we have a new commodity that looks like it is here to stay. I feel that a lot of people underestimate the green energy movement and the role that Lithium plays in it.”

The electric car is no longer elite. Now it’s for the masses, and the masses will need more lithium than we can currently get our hands on. It’s a wide-scale energy revolution that will end being—in hindsight—the first nail in the coffin for fossil fuels and the heralding of a new era of lithium, the “white petroleum”.

Source: OilPrice.com

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