Tesla Lithium Dash Could Slow as Mine Project Faces Hurdle (1)...

Tesla Lithium Dash Could Slow as Mine Project Faces Hurdle (1)

• Mt. Holland venture in Australia may be delayed, owner says
• Lithium mine targets output of 44,000 tons of lithium per year

By Laura Millan Lombrana
(Bloomberg) --
An Australian mining lithium project that has an agreement to supply Tesla Inc. faces a legal hurdle that may delay plans to start production, potentially spurring shortages of the mineral used in batteries for electric cars.
A court in Perth recommended Western Australia’s mining ministry shouldn’t approve an exemption from past minimum exploration-expenditure obligations at the Mt. Holland hard-rock project, lithium giant SQM said in a statement on Wednesday. Development of Mt. Holland, owned by SQM and Kidman Resources Ltd., could be slowed if the ministry doesn’t award the exemption, SQM said.
Analysts expect a small lithium surplus the next few years, and any snags at major suppliers risk throwing the market into deficit, according to Bloomberg NEF. In May, Tesla signed a three-year supply contract with Kidman. The deal with a junior miner that isn’t expected to start producing until 2021 shows how electric-car and battery makers are rushing to get supply of the mineral.
“This is going to be a concern to Tesla -- they had hopes to lock in supply by signing this off-take with Kidman," said James Frith, a BNEF analyst in London.
While the 2021 start date gives Tesla time to line up additional sources, costs could rise for the automaker, according to analysts including Frank Schwope at Nord/LB. A spokesman at Palo Alto, California-based Tesla contacted by email and phone didn’t provide a comment on the possible mining delay.
Following years of under-supply, the market will be in a small surplus until 2020 as SQM increases production capacity in Chile and two new mines are built in Australia, according to a BNEF report. Still, any delays could tip the balance -- and new lithium projects tend to encounter administrative hurdles or suffer longer-than-expected ramp ups, according to the report.
This could be the case with Mt. Holland if Western Australia decides not to approve the exemption on properties necessary to develop the project, according to the statement from SQM, formally known as Sociedad Quimica y Minera de Chile SA.
Under Western Australia’s regulation, mining prospectors have minimum expenditure obligations and reporting requirements. Kidman Resources shares were halted on Wednesday ahead of the recommendation from the Mining Warden for Perth.
“The recommendation from the Warden’s court is not a final decision in regards to the requested exemption,” SQM said in the statement. “If it is followed, it could generate uncertainty or delays in the project’s development.”
Lithium Hunt
Mt. Holland is targeting an annual capacity of 44,000 metric tons of lithium hydroxide. Less than a quarter of the mine’s production will go to Tesla, Kidman Resources said in May. The company will be providing Tesla with an amount of lithium close to what the car-maker needs to feed its battery gigafactory every year.
While no other lithium supply agreements with Tesla have been made public, the company could have locked in supply through partners such as Panasonic, according to BNEF’s Frith.
The 2021 start date gives Tesla enough time to deal with this possible bottleneck, said David Whiston, equity strategy at Morningstar Inc. It is unclear how much other supply they have either from their own or from Panasonic’s suppliers, he said.
“Supply disruptions just delay rather than cancel the realization of future vehicles," he said.