‘We need more’: Tesla founder Elon Musk’s message to global nickel miners

Elon Musk has a plea for mining companies: “Please mine more nickel” (reports Bloomberg)
24th July 2020
Resources Rising Stars

Elon Musk has a plea for mining companies: “Please mine more nickel” (reports Bloomberg)

“Tesla will give you a giant contract for a long period of time if you mine nickel efficiently and in an environmentally sensitive way,” said Musk, chief executive of the electric-carmaker, during a second-quarter earnings call.

Musk’s plea comes as one of Japan’s general trading giants is about to take a roughly $US500 million ($700m) writedown on a nickel project in Madagascar because of low prices and the coronavirus pandemic.

Supplies of battery-grade nickel — a key component in the cathode of an electric vehicle’s battery — could run short as early as 2023. BloombergNEF expects a tight balance in the next two to three years as lithium-ion battery demand picks up.

Already, Ambatovy — one of the world’s largest nickel projects, with full operational capacity representing 5 per cent of class 1 nickel global production capacity — hasn’t resumed operations after being suspended in March 2020.

An extended suspension will exacerbate the potential tightness in the nickel market.

The global electric vehicle lithium-ion battery market is projected to reach $US95.3b by 2030, with WA well placed to capture a significant slice of the action if it can process and refine its raw materials such as lithium, nickel, cobalt and manganese into higher-value battery chemicals.

BHP’s Nickel West division last month struck a deal to buy the massive Honeymoon Well nickel project in the Goldfields from Norilsk Nickel, again highlighting its intention to expand its exposure to the battery metal.

“Nickel continues to be an essential input into new technologies that will improve the battery storage needed for renewables and electric vehicle manufacturing,” said Nickel West asset president Eddy Haegel.

“Consistent with our strategy to invest in future-facing commodities, this transaction gives us access to explore and develop these prospective nickel sulphide tenements.”

Musk’s plea for more nickel came as Tesla revealed it had overcame a seven-week pandemic-related shutdown at its US assembly plant to post a surprising $US104m net profit for the second quarter.

It was the company’s fourth-straight positive quarter, qualifying it to be included in the S&P 500 index of corporate titans. A decision on that will be made later.

Local government restrictions forced the electric car and solar panel maker to close its only US assembly factory in California from March 23 to May 11. The company paid roughly 10,000 workers for part of the shutdown and continued health care and other benefits.

Excluding one-time items such as $US347m in stock-based compensation, Tesla made $US2.18 per share. That beat Wall Street estimates of a break-even quarter, according to FactSet. Revenue was down 4.9 per cent from a year ago to $US6.04b. That still beat estimates of $US5.15b.

The company said its progress in the first half of the year has positioned it for success in the second half as production output continues to improve.

Telsa also said it has picked the Austin, Texas, area as the site for its second US assembly plant. Austin was the front runner, but Tulsa, Oklahoma, was a possibility.

The surprising profit, compared with a $US408m loss a year ago, pushed Tesla’s shares up 5.3 per cent to $US1676.22 in after-hours trading Wednesday.

Tesla would have lost money, though, without $US428m it earned from selling electric vehicle credits to other automakers so they can meet government fuel economy and pollution regulations.

The company said its profit increased over the first quarter’s tiny $US16m because of “fundamental operational improvements”.

But it issued a note of caution in its investor letter released Wednesday after the markets closed: “It remains difficult to predict whether there will be further operational interruptions or how global consumer sentiment will evolve in the second half of 2020.”

Tesla said it should have enough money to fund new products and to build new factories in the US and Germany, as well as cover other expenses. The company said it would begin delivering its electric semi next year.

Tesla generated $US964m in cash from its operations from April through June, and it ended the quarter with about $US9.1b. But it also had $US8.5b in debts, according to financial statements.

Musk had pledged to build more than 500,000 vehicles this year, but the company said the Fremont factory shutdown has made that goal more difficult. Still, the company has a target of delivering more than a half-million vehicles this year, and is installing equipment to increase Fremont’s output, the letter said.

Tesla’s second-quarter profit came after it announced better-than-expected global sales during the period. The company said it delivered 90,650 vehicles from April through June as it rolled out the new Model Y SUV in the US and China.

That’s a 2.5 per cent increase over the first quarter’s 88,400. But it was a 4.8 per cent drop from the second quarter of 2019, when Tesla delivered 95,200 vehicles.

The second-quarter sales came with a feverish push in June to crank out and sell more vehicles in the US But the push was accompanied by numerous quality problems reported on Tesla owner forums and social media.




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