Rare Earth Minerals and Bacanora Minerals Ltd., the joint venture partners of the Sonora Lithium Project in Northern Mexico have finalized a conditional long-term lithium hydroxide supply agreement with Tesla Motors, Inc., the maker of electric vehicles and energy storage solutions.
The Sonora Lithium Project Partners are working to develop a mineral-rich, lithium-bearing clay deposit into a planned low-cost sustainable and environmentally conscious mining operation. It is estimated that the mine and processing facility will have an initial production capacity of approximately 35,000 tonnes of lithium compounds, with scaling potential of up to 50,000 tonnes per year. To achieve this, the Partners will need to raise finances to design and construct a mine and processing facility. It is currently anticipated that lithium hydroxide and lithium carbonate would be among the materials produced by the mine. Lithium hydroxide is a key feedstock material in the manufacture of certain kinds of lithium-ion battery cells.
On the condition that, over the next two years, the Project reaches certain performance milestones and successfully passes product specification qualifications, Tesla - or its authorised purchasers - will buy lithium hydroxide to feed the manufacturing of batteries at the Tesla Gigafactory in Nevada. One of the key milestones will be the confirmation that the Sonora Lithium Project will be able to supply lithium hydroxide in accordance with volumes and time frames to be established by Tesla. The Supply Agreement has an initial five-year term commencing from the date of the first order by Tesla, with an option to extend for a further five years.
Development work to be used for the pre-feasibility study for the Project is currently being carried out. The PFS alongside additional studies will establish a revised estimate of capital and operating costs, taking into account the new product mix that will be required to service Tesla needs as well as others.
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