By Justin Spittler, editor, Casey Daily Dispatch
Tesla just put the rest of the auto industry on notice.
Tesla, as I’m sure you know, is the largest electric vehicle (EV) maker in the U.S. It’s also one of America’s most loved—and hated—stocks.
I say this because Tesla’s one of the most innovative companies on the planet. It’s run by CEO Elon Musk, a certified genius. At the same time, Tesla has major problems.
But Tesla did something last week that even I had to commend…
• It went straight to the source to secure one of the world’s most sought-after natural resources…
Last Thursday, the electric car maker struck a huge lithium supply deal with Kidman Resources, a small mining company based in Australia.
Now, we don’t have all the details of this deal yet. But here’s what we know…
Tesla is expected to buy about 5,000 tonnes of lithium a year from Kidman during the initial three-year term. After that, it will have the option to extend the deal for two additional three-year terms.
But get this…
• Kidman’s lithium processing plant isn’t built yet…
It won’t be finished until 2021.
That tells me Tesla has serious concerns about the supply of lithium going forward.
And it’s easy to see why.
Lithium is a key ingredient in lithium-ion batteries. These batteries power the smartphone in your pocket. They also power EVs.
A few years ago, this market barely existed. There were just a few hundred EVs in the world. Only the rich drove them.
Today, there are around one million EVs in the world. And that number grows by the day.
In fact, analysts estimate that there will be 27 million EVs on the road by 2027. This means that the EV market is poised to grow 27-fold over the next decade.
The market is growing so quickly that nearly every major carmaker is going electric.
That’s made lithium one of the world’s most sought-after resources.
• It’s also why Tesla inked this deal with Kidman…
It wants to ensure that it has a steady stream of lithium for years to come.
Now, I’m not so sure that Tesla will be around to collect this lithium from Kidman in a few years. But I didn’t write today’s essay to lay out my bearish thesis on Tesla. (If you’re interested in that, you can read my latest article on the topic here.)
I wrote this because Tesla just confirmed what I’ve been saying for months: Lithium demand is shooting through the roof, due to the EV revolution.
If you’re new to the Dispatch, let me bring you up to speed.
Last year, the global economy consumed about 240,000 tonnes of lithium carbonate equivalent (LCE). And about 40% of that lithium went to the battery market.
That’s a lot of lithium. But it’s just the beginning.
By 2025, analysts expect global lithium demand to hit 800,000 tonnes per year. This means that demand is poised to more than triple over the next seven years.
• As a result, miners can’t dig lithium out of the ground fast enough…
To keep pace with soaring demand for EVs, Goldman Sachs says that lithium production will need to quadruple over the next decade. And SQM, the world’s largest lithium producer, projects that between $10 billion and $12 billion will need to be spent on global lithium investments over the next decade.
The problem is that most of this badly needed lithium is still underground. Some of it hasn’t even been found yet.
That’s why Tesla went “upstream” to secure lithium. It needs to get its hands on this precious commodity while it still can.
Of course, Daimler AG, BMW, and Volkswagen won’t just sit back and let Tesla corner the global lithium supply. They’ll follow Tesla’s lead and go straight to source.
That’s obviously bullish for lithium.
But we’re not just seeing this happen with lithium…
• There’s also an all-out land grab for cobalt right now…
Cobalt is another key component in lithium-ion batteries. In fact, these batteries can contain up to three times more cobalt than lithium.
As a result, cobalt demand is soaring—so much so that Apple has entered talks with major cobalt miners to “secure several thousand metric tons of cobalt for five years or longer.” BMW and Samsung have also gone to great lengths to secure their own cobalt supplies.
This is why cobalt is up more than 298% since 2016.
That’s a huge jump. But I expect the cobalt and lithium markets to head much higher in the coming years.
After all, BMW forecasted last December that demand for key metals like cobalt and lithium would increase 10-fold by the middle of the next decade.
So I encourage you to speculate on these metals if you haven’t already. The best way to do this is to own mining stocks. These companies dig new strategic resources out of the ground. That makes them highly leveraged to the price of the metals.
Just remember that this is a speculation. Miners are volatile. As always, keep your position sizes small… and never bet more money than you can afford to lose.
Punta del Este, Uruguay
May 25, 2018
P.S. Of course, most people don’t know the first thing about mining stocks. That’s where we can help.
Dave Forest, editor of International Speculator, is our in-house resources guru. He’s a professional geologist with 20 years of experience in the oil and gas, environmental, and mining sectors.
He and Casey Research founder Doug Casey have a three-part blueprint for finding the best mining stocks on the planet. And they’ve recommended a small cobalt play set to soar in the months ahead.
To learn more about their strategy—and how to access the name of this explosive cobalt stock—click here to watch our new video presentation.
Very interesting. Regarding microdrones, the key will be the distance that they can travel and where they can be armed and launched from.
Did you hear that Russia is developing Poseidon underwater nuclear drones? Nothing like that was mentioned.
I was very interested in Doug’s discussion about drones and their use in warfare. One thing that he did not mention, which I believe is significant, is that there is already a lot of research going into the design of drone “squadrons.” The current use of a single person per drone (i.e., remote control “pilot”) becomes difficult when you have multiple drones, simply to avoid collisions between drones. The focus (this is two or three years ago so it may already be in place to some degree) is to develop “smart” drones that can monitor their position and other nearby aircraft to avoid running into each other. One smart drone might be able to control a group of regular drones in a prearranged manner to coordinate an attack or other mission, such as medical transport.
It isn’t that far a step to have a central AI controlling the drones, and the final question is whether the ultimate AI result will be Skynet or the “WOPR” computer in WarGames—either the AI determines humans are unnecessary, or that such a war is illogical.
Great article! Casey mentioned that the singularity is about a generation away. But I’m guessing that black budget tech is about a generation ahead of the conventional world. So two questions: In the black budget world, has the singularity already arrived? At the very least, wouldn’t the singularity first manifest in the black budget world?
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