On Wednesday September 16th, Nevada’s Pure Energy Minerals (PE.V) / (HMGLF) & (AHG1.DE) announced the signing of an agreement with Tesla Motors Inc. (TSLA). To say that this is big news for the Company would be an unforgivable understatement. Each agreement between Tesla and a junior company is unique. For the avoidance of doubt, here are key parts of the press release, quote, (modestly condensed),
“… the Company has entered into an agreement with Tesla Motors for the potential supply of lithium hydroxide that Pure Energy Minerals plans to produce from the Company’s Clayton Valley, NV Lithium Brine Project. Pure Energy will conduct mining studies in the forms of, Preliminary Economic Assessment, Pre-Feasibility OR a Feasibility Study to confirm the technical & economic viability of the Project.”
The press release continues, quote, (modestly condensed),
“Provided that Pure Energy meets terms and conditions related to the project’s quality and timing of delivery, the Agreement establishes a commitment for annual purchase volume over a period of 5 years. The Agreement sets a pre-determined price that is below current market prices, aligned with Tesla’s goal to reduce the cost of its lithium-ion batteries. Any deliveries from Pure Energy would cover just a portion of Tesla’s needs, the remainder to come from other sources.”
Mining has been integral to Nevada’s history and the State has fostered a thriving industry, Robert Mintak, Pure Energy’s CEO, commented,
“This agreement with Tesla is a significant milestone validating Pure Energy’s lithium brine project and business development model. It’s an important step in the development of the Project. Pure Energy is aligned with both Tesla’s and the State of Nevada’s development objectives, and we hope to positively contribute to Nevada’s booming clean energy based economy.”
This agreement represents more than a potential off-take partnership. It’s a true vote of confidence in Pure Energy Minerals by Telsa. In fact, POSCO too has sent a clear signal that it wants to work with Pure Energy as well. Consider the possibility of Pure Energy enjoying better access to financing when that need arises. Consider the ability of the Company to possibly move rapidly with Nevada State officials on permits. For these reasons and more, this single press release is probably worth more than any other.
As an aside, Bacanora Minerals Ltd’s stock was up 55% in subsequent days from 65 pence to an intra-day high of 100 pence upon its announced contingent lithium supply agreement with Tesla.
Stepping back for a moment, on September 3rd, Tesla’s Founder Elon Musk reiterated his commitment to source materials from Nevada and more broadly, North America. However, that pledge did not necessarily mean another sourcing deal anytime soon, or that it would be for lithium.
Other materials are required for lithium-ion batteries. These include cobalt and graphite (among a growing list of others such as magnesium), that will be needed to feed Tesla’s massive giga-factory in Nevada. I imagine that other lithium agreements will be signed going forward, in fact that’s a certainty. Without question, Nevada State officials expect further lithium deals to come from Nevada’s lithium hub. Western Lithium (WLC.to) and Dajin Resources DJI.v & DJIFF are two other promising juniors in Nevada.
With a conditional agreement with Tesla, Pure Energy has leapfrogged over peers. A foot in Tesla’s door could pave the way for larger companies in Nevada and around the globe to kick the Company’s tires. It’s a lot easier for a strategic player to acquire Pure Energy then to initiate green field exploration. Time is money, Pure Energy has saved prospective suitors 3 years.
The article speaks for itself, a detailed conclusion is probably not required. Simply put, Pure Energy Minerals, (PE.V) / (HMGLF) & (AHG1.DE) has won a highly coveted spot on Tesla’s list of future lithium producers. No matter the exact terms, Tesla would not get into bed with a junior that they did not have conviction in. Tesla did a substantial amount of due diligence for quite some time before pulling the trigger. Tesla must be very comfortable that Pure Energy can deliver the type of lithium required within a stated timeframe. Finally, and this is [entirely my own opinion], readers should not rule out State support in getting Pure Energy over the finish line.
Disclosure: Several of the companies mentioned herein have small market caps, including Pure Energy, Western Lithium and Dajin Resources, small market cap stocks are highly speculative, not suitable for all investors. I, Peter Epstein, own shares of PE.V & DJIFF Mr. Epstein, CFA, MBA, is not a licensed financial advisor. Readers should take that fact into careful consideration before buying or selling any stock mentioned. Readers are highly encouraged to consult with their own investment advisors before buying or selling any stock, especially speculative ones. At the time that this article was posted, Pure Energy and Dajin were sponsors of: http://EpsteinResearch.com. Please consider visiting: http://EpsteinResearch.com for free updates on Pure Energy, Dajin Resources and others across a range of sectors. While at http://EpsteinResearch.com, please enter an email for instant delivery of my work. Thank you for your ongoing support.