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Tesla Might Enter Mining Business After All, As It Mulls Sigma Lithium Buyout

Elon Musk has been talking about the necessity of entering the mining business for almost a year. Nevertheless, as the EV war is heating up and carmakers scramble to secure the battery minerals, Tesla is poised to make a decisive move. Fresh rumors indicate that the EV maker is considering bidding for the lithium mining company Sigma Lithium.
Tesla mulls Sigma Lithium buyout 6 photos
Photo: Planet Proof via YouTube | Edited
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Ramping up EV production puts pressure on the supply chain that provides key minerals for Li-ion battery production. This, in turn, causes prices to soar, affecting the balance sheet of every EV manufacturer. The upward trend of lithium prices became a nuisance in April last year, as Tesla was pushing hard to meet the demand for its electric vehicles. The price of lithium surged 17 times compared to 2012, reaching almost $80,000 per ton and rattling Elon Musk. The outspoken CEO said back then that Tesla should probably enter the lithium mining and refining business.

Since then, Tesla has contemplated entering the mining business, as Musk suggested, and was quite close to a deal several times. In October 2022, Tesla was rumored to buy a 20% stake in mining giant Glencore. The deal fell apart after Tesla became worried about Glencore’s environmental issues. Glencore has also been involved in questionable mining practices, including hiring underage miners. Nevertheless, Tesla has continued efforts to find a suitable mining company, and industry sources say it has many options to consider.

One of these options is buying Sigma Lithium, a mining company whose largest shareholder is looking to sell its stake. According to sources cited by Bloomberg, Tesla is analyzing a potential bid for the lithium mining company. The discussions are at an early stage, and a deal might not materialize, but Tesla is also considering other mining options.

Sigma Lithium’s largest shareholder, A10 Investimentos, has been exploring a potential sale of the company and gauged interest from carmakers and other mining companies. Nevertheless, Sigma Lithium’s shares have tripled in the past 12 months, which might make anyone wishing to bid think twice. The company’s most important project is a lithium rock deposit in Brazil known as Grota do Cirilo, where a recent survey revealed that mineral reserves are 63 percent higher than previously thought.

Automakers have been keen on partnering with mining companies to secure the precious minerals needed for Li-Ion battery production. Scaling production and the Inflations Reduction Act tax incentives will only accelerate this trend. Tesla has already announced a lithium refinery in Texas and is looking to expand its footprint in the minerals mining and processing business.

Tesla has estimated its EV production at 1.8 million units in 2023, and other carmakers are also looking to accelerate their EV plans. This means more lithium and minerals would be needed, and mining them is the only option for now. Once enough car batteries reach the end of life and recycling catches steam, the need to mine for more minerals is expected to evaporate. Although this is still many years away, it makes a mining investment risky, just like it happened with coal mining.
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About the author: Cristian Agatie
Cristian Agatie profile photo

After his childhood dream of becoming a "tractor operator" didn't pan out, Cristian turned to journalism, first in print and later moving to online media. His top interests are electric vehicles and new energy solutions.
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