Electric car manufacturer Tesla has signed a deal with Australian mining company Kidman Resources to supply it with refined lithium hydroxide.
The two companies announced today that they are entering into a three-year agreement for the supply of lithium hydroxide, a crucial metal in the production of lithium ion batteries used in electric vehicles (EVs).
Kidman said in its statement that the commercial terms of the deal will remain confidential but said that the deal is on a fixed-price take-or-pay basis, which means that if Tesla does not buy the products they will be liable for penalty costs, from the first product delivery and contains two three-year term options.
On 4 May the company announced that it was going to develop a new lithium processing plant at its Western Australia site in Kwinana, which is a joint venture with Chilean chemical and mining company Sociedad Quimica y Minera de Chile. Kidman also said that the deposit allowed for increased production.
The deal makes up under 25 per cent of Kidman's portion of overall production for the first three years from the refinery.
Kidman said: “In addition to the agreement with Tesla, Kidman is in discussions with other strategic, globally significant parties also seeking refined lithium uptake.”
“To date, expressions of interest from these parties have materially exceeded Kidman's portion of initial refinery nameplate production.”
High demand for lithium has significantly increase since the advent of EVs as it is one of the key metals, along with cobalt and copper, in the development of the batteries needed to power the vehicles.
According to analyst at Shore Capital Yuen Low, the EV industry will affect future lithium production significantly and that it will result in increased production as recycling of the material is still very limited due to its cost.
Although lithium is a finite natural resource, a study in the Journal of Power Sources found that currently known world reserves are sufficient to sustain the growth in EV production and that the current reserves could power 2bn EVs, four times the number of cars currently registered globally.