Elon Musk's recent musings that high lithium prices may force Tesla to make its own supply of the electric vehicle battery metal have fuelled hopes by some that the billionaire entrepreneur will instead opt for a buyout of an established mining company.
The auto giant already has supply contracts for nickel, lithium and a range of other EV metals from suppliers across the globe. But it needs more, and industry analysts say Tesla may soon realise that building a mine or processing facility from scratch is not as easy as it sounds and the automaker should instead consider a buyout.
"Price of lithium has gone to insane levels! Tesla might actually have to get into the mining & refining directly at scale, unless costs improve," the Tesla chief executive tweeted earlier this month. Lithium prices are up more than 80 per cent this year and nickel prices have gyrated heavily amid trading turmoil in London.
The billionaire entrepreneur had already complained about "significant" jumps in raw materials costs for Tesla, which has raised prices of its vehicles twice this year.
"Should management be serious about entering the lithium space, we think the most likely route would be an acquisition of an existing lithium company," said Morningstar lithium analyst Seth Goldstein.
Shares of junior miner Lithium Corp jumped more than 30 per cent on Apr 13 after unsubstantiated reports that it and its Nevada brine deposits had been sold to Tesla, a rumour the company denied. Shares of larger lithium producers, such as Albemarle Corp, reacted little to Musk's tweets.
"Elon, if you want to talk to us, come and say hello," said Tom Lewis, Lithium Corp's CEO, who said the buyout rumors likely were an "orchestrated plan to pump (our shares) up a bit."
Amid the minerals talk, Musk last week made a US$43 billion cash offer to buy social networking platform Twitter Inc.
"If you're going to spend US$43 billion and you run Tesla and you understand better than anyone Tesla's future lithium needs, you might want to spend a lot less and buy a lithium company or two," said lithium industry consultant Joe Lowry.