Tesla Motors Inc (TSLA) Makes Convenient Nevada Lithium Find

Tesla Motors Inc NASDAQ:TSLA

Tesla Motors Inc got into a little bit of trouble when it partnered with a lithium project based in Sonora, Mexico in order to supply its Gigafactory. After the more than $1B the firm was given in subsidies and tax breaks for the plant in Nevada, some lawmakers felt betrayed. On Wednesday morning Elon Musk and his team appear to be making things right.

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Pure Energy Minerals Ltd , a firm based out of Canada, said it had reached an agreement to supply Tesla Motors with lithium hydroxide from a source in Nevada. The firm said that its deal with Tesla Motors was conditional on its ability to supply the metal ore in the right amount and at the right grade.

Tesla Motors needs to impress Nevada

The Gigafactory may be the key piece of work that Tesla Motors  and Elon Musk are doing right now. The firm is going, if CEO Elon Musk is believed, to use the plant in order to push the price of its EVs lower, make a profit from its EV sales and build an empire. Success relies on the goodwill of the State of Nevada, however, and that was hurt in recent weeks.

After Tesla Motors revealed a deal to get lithium from Sonora, some in the Silver State said that it formed a betrayal on the part of Mr. Musk and Tesla Motors. Tick Segerblom, who represents Nevada’s District 3, said he was looking for a Nevada project to be opened in the state.

“Whether that was something we created or whether they misled us, I honestly can’t say. It shows you can get excited in the moment about what’s going to occur without ever actually questioning: ‘Are you intending to use Nevada lithium?’” he said.

In a tweet earlier this month Mr. Musk said “Lithium deal is not exclusive & has many contingencies. The press on this matter is unwarranted.” He was trying to calm the fears of those in Nevada who felt that Tesla Motors had betrayed them. The Gigafactory is far from finished. Tesla Motors needs every possible player on its side right now.

Tesla Motors expands lithium sources

James Albertine of Stifel Research reckons that the Gigafactory is one of the most key movers for shares in Tesla Motors Inc going forward. In his view the plant, among other things, makes the stock worth $400.

He reckons that Tesla Motors will need to get its hands on lithium sooner rather than later as pilot production in Nevada begins in the first quarter of 2016.

Pure Energy Minerals Ltd won’t be able to supply the first run. The firm says that it still has to perform studies “to confirm the technical feasibility and economic viability of the Project.”

The Nevada project is nowhere near ready and, indeed, it may never supply the Gigafactory. It has great political import for the time being, however, and it will form part of an argument about the effect Tesla Motors has on Nevada.

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