Tesla secures lithium deal from Nevada site

Tesla Motors could be acquiring lithium closer to home after the company secured a supply deal from a location just a few hours away from its gigafactory site in Nevada.

Vancouver-based Pure Energy Minerals announced on Wednesday morning that it finalized an agreement with Tesla to potentially supply the company with lithium hydroxide for use in its batteries.

The lithium will be procured from Pure Energy's' Nevada Lithium Brine Project at Clayton Valley, just three and a half hours away from Tesla's "Gigafactory 1" site east of Reno-Sparks. It is also on the same basin as Albermarle's Silver Peak lithium brine mine. Silver peak is the only producing lithium operation in the United States.

The agreement with Tesla is a key milestone for Pure Energy's lithium brine project and its business development model, said Robert Mintak, Pure Energy CEO.

"We think the project, its Nevada location and Pure Energy's green, clean, innovative development model provide a unique opportunity as a domestic lithium source," Mintak said by phone on Tuesday evening. "It's been a hectic day (and) we're extremely excited working with Tesla Motors."

The agreement is contingent on Pure Energy successfully developing the lithium site. Pure Energy says it will be conducting a mining study to determine if the site is technically feasible and also viable economically. If the company satisfies the terms of its agreement regarding execution of the project, lithium hydroxide quality and product delivery, Pure Energy's deal with Tesla will cover a five-year period.

"(Tesla's timetable) synchronizes well with our project's development schedule," Mintak said.

Pure Energy also will be supplying the resource at a price below current market rates, a key sticking point for Tesla as it aims to keep lowering costs for its batteries. Lowering the overall cost for making its batteries is also a key factor in Tesla's decision to build the 10 million-square-foot gigafactory, which is expected to have the largest footprint in the world for a building.

The Pure Energy deal will only cover a portion of Tesla's lithium needs, which will involve multiple sources. The company recently inked a five-year deal to procure lithium from the Sonora Lithium Project in Mexico, another site that is under development as well. Earlier this month, Tesla CEO Elon Musk tweeted that the Mexico deal is not exclusive and has many contingencies. Musk added that the company continues to look at lithium sources in Nevada as well.

Even before last year's gigafactory announcement, some hoped that Tesla's need for lithium would help recharge the industry in Nevada, which is believed to contain the largest deposits of lithium in the U.S. The $5 billion gigafactory is projected to produce enough battery packs for 500,000 vehicles each year and also manufacture Tesla Energy storage batteries.

"Pure Energy is aligned with both Tesla's and the State of Nevada's development objectives," Mintak said. "We hope to positively contribute to Nevada's booming clean energy-based economy."

A Tesla spokesperson confirmed the deal but declined to comment.