Tesla will give sustainable nickel miners a giant contract

As our the future is becoming more and more electrified this opens lots of new opportunities for investors. One of these opportunities is called nickel which is an essential ingredient for use in batteries for EV’s. In this article we will have a look at the origins of the demand for nickel, what the expectations for the near future are, and lastly what is the best way of making a profit from the nickel rush.

Tesla in talks with Giga Metals; stock surges

Last week a reports came out that Giga Metals is currently in talks with Tesla for supplying nickel as a resource for producing its batteries. This lead to the stockprice jumping from 40 cents to a whopping $2,40 for a moment after falling back to $1.17 again. This still is more than 5 times what the price was back in July when the price was hovering around $0,20. There is no official confirmation yet for the contract to be signed yet, so price has dropped again. Might surge when announcements are made.

Giga Metals stock surged on the rumours of being in talks with Tesla

Elon Musk asking nickel miners to mine more nickel

The fire started by Elon Musk asking for nickel miners to mine more nickel during the Q2 earnings call saying:

“Tesla will give you a giant contract for a long period of time if you mine nickel efficiently and in an environmentally sensitive way”

Canada Nickel immediately took to Twitter to get in touch with Elon saying they needed to talk. Teslarati wrote an article about this to which Elon replied ‘Sounds great’. We do not know what the current status is, nor whether they are actually in talks, but the company does fit in the desire for green nickel.

Where does the sudden demand for nickel come from?

But before we dive into this any further, first some background information as to why nickel is so important now. Conicmetals has as great article explaining nickel rich battery chemistries. Below are some quotes from that article:

“With the accelerated mass adoption of electric vehicles and roll-out of energy storage systems, nickel like cobalt, is expected to materially benefit from the new energy paradigm. Two chemistries of lithium-ion batteries dominate electric vehicle batteries. – Nickel-Manganese-Cobalt or ‘NMC’, and Nickel-Cobalt-Aluminum or ‘NCA’. The NMC battery chemistry is used by nearly every automobile manufacturer in the world with the exception of Tesla, which uses NCA chemistry. However, research indicates that, for at least the next decade, the evolution of the lithium-ion battery and its NMC chemistry is towards a more nickel-rich cathode.”

Below originates from the same Conicmetals article, but is originally quoted from Marc Grynberg, Chief Executive Officer, Umicore

“If you increase the nickel proportion, you reduce the stability of the battery and so it has an impact on cycle life, the ability to charge it fast, cobalt is the element that makes up for the lack of stability of nickel. There isn’t a better element than nickel to increase energy density, and there isn’t a better element than cobalt to make the stuff stable. So (while) you hear about designing out cobalt, this is not going to happen in the next three decades. It simply doesn’t work.”

This latest piece contradicts with Musk saying next gen batteries will use no cobalt at all. However cobalt will still be part of current batteries which will still be in production for quite some time.

So how much nickel is actually inside an EV battery?

A Tesla Model 3 battery contains around 30KG to 50KG of nickel. Nickel contains the actual energy of the battery meaning, the higher the energy density, the higher the amount of nickel needed. This opens up opportunities for when more energy dense batteries being developed.

So with the increasing demand as well as more energy dense batteries, demand for nickel is expected to increase so much that it is likely to outstrip supplies within five years, a Detroitnews article from august 2019 reports. The Detroitnews article mentiones the Demand for nickel is forecast to surge about 16 times to 1.8 million tons of contained metal by 2030. Something that has already been proven the right call back then as demand for nickel accelerates.

Nickel shortage already

To mitigate the nickel shortage, Tesla uses Lithium Iron Phosphate batteries in its China Model 3 vehicles. This leads to a cheaper and slightly less energy dense battery, but is also heavier compared to the nickel based battery.

This Cleantechnica article from august 25th 2020 does a great job explaining the upcoming nickel rush, even mentioning ‘Is Nickel The new Gold?‘ A small piece from this article by Cleantechnica:

More recently, Musk reiterated the importance of nickel, and made what sounded to some like an urgent plea for more of the stuff. “I’d just like to re-emphasize, any mining companies out there, please mine more nickel,” said Musk during Tesla’s latest quarterly conference call. “Wherever you are in the world, please mine more nickel and … go for efficiency, obviously environmentally-friendly nickel mining at high volume. Tesla will give you a giant contract for a long period of time, if you mine nickel efficiently and in an environmentally sensitive way.”

The article also points out that if you want environmentally-responsible nickel Canada and Australie are the places to look for as they have some of the thoughest environmetal regulations in the world. Meaning that if you buy nickel from these first world jurisdictions this part of the supplychain is ethically sourced.

So nickel shortage is becoming a real problem already, and we’re only at the start of a more sustainable future. The increased demand for all the needed resources, like nickel, will lead to many new opportunities for investors. By now it’s obvious nickel is in high demand, and below you’ll find some reasons to assume nickel demand will absolutely skyrocket in the next few years.

  • Tesla Semi and Cybertruck are not even in production yet but the immense batteries for these vehicles will ask for huge amounts of nickel
  • Elon Musk said he expects the Tesla’s energy business will be equal or bigger than its Tesla vehicle business. Think of Tesla Powerwalls and grid solutions like the one in Australia that again ask for huge amounts of resources like nickel.
  • Elon wants to build electric supersonic VTOL aircraft in 3 to 4 years from now, aiming to disrupt the airline industry. Again this will lead to even more demand for battery resources.

Tesla will give ANY nickel miner that mines nickel in an environmentally sensitive way, a GIANT contract. And they are only just getting started with their in house battery cell production! This might be a chance you don’t often get. Nickel demand will be insane!

What stocks does this all lead to?

I’ve found two Canadian nickel miners that fit the green nickel desire. Canada Nickel and Talon Metals, both are listed on the German Exchange in Frankfurt, as well as on the Canadian Toronto exchange.

Canada Nickel

Canada Nickel in July 2020 applied for the following trademarks in the U.S., Canada and other jurisdictions related to nickel, cobalt and iron products, as reported by prnewswire.com:

  • NetZero NickelTM,
  • NetZero CobaltTM, and
  • NetZero IronTM

Other arguments that make Canada Nickel a good candidate for a future Tesla contract are:

  • Environmentally friendly way of mining
  • Relatively close to the area of where it is needed (by Tesla)
  • They tagged Elon Musk on Twitter on which Elon responded (via Teslarati)
  • Low stock price with high upward potential (around $1 at the time of writing)

The CRUX Investor Youtube channel has lots great in depth information in regards to mining and metals in general. Below an interview done by Matthew Gordon from CRUX Investor with Canada Nickel CEO Mark Selby gives a great insight in their current and future plans and how this fits the Tesla desire for green nickel as mentioned by Elon Musk.

Interview with Mark Selby, CEO of Canada Nickel (TSX-V: CNC)

Talon Metals

Talon metals send out a press release just ahead of Tesla Battery Day explaining their excellent position in regards to mining green nickel. Below some quotes from the press release:

Talon’s Tamarack “Nickel-Copper-Cobalt Project (“Tamarack Project”), located in Minnesota, is positioned to become the only U.S. source of Green Nickel in North America, and a key supplier to battery and electric vehicle manufacturers.”

“Sean Werger, President of Talon, said, “The Tamarack Project is extremely well positioned for the advancement of battery technology, particularly for those advancing EV technology seeking sustainable sources of nickel. The production of Green Nickel^TM for batteries all starts and ends with the rocks it is mined from: They need to be high in nickel and low in deleterious elements.”

The Tamarack Project is one of the only undeveloped deposits that meets these criteria, and we expect it will play a critical role in the supply chain for battery and vehicle manufacturers looking for the lowest cost product produced in the most responsible way.”

Just like Canada Nickel the same arguments here:

  • Environmentally friendly way of mining
  • Relatively close to the area of where it is needed (by Tesla)
  • Low stock price with high upward potential (around $0,20 at the time of writing)

Of course there are more miners, but to my best estimates I think these are the ones that are the most probable of coming to an agreement in the foreseeable future with Tesla. This is due their location and environmental friendly way of mining.

Tesla building own lithium mining facility

During Tesla Battery Day Elon Musk announced the following:

We will start building our own cathode facility and leveraging all the North American resources that exist for nickel and lithium.

The lithium mining is something Tesla will do on its own 10.000 acres of land, nickel is what they buy from miners like Talon Metals, Canada Nickel or Giga Metals.

So that all wraps it up for now! I think nickel mining companies will see a very nice and bright future with all EV vehicles produced in the future asking for insane amounts of nickel. Don;t forget that Tesla is not the only one in need for nickel, there are many more manufacturers on the same hunt for nickel. Maybe not yet at this very moment, but certainly this will happen.

Bonus

While editing the video I made about this nickel stocks topic (some people like to read, others like to watch :)), I stumbled across this CNBC article from September 18th stating:

“The analyst said the target hike came after examining Tesla’s energy segment and noting: “We anticipate sharply higher demand for these products.”

The expected increase in demand in energy storage products plays out well for the demand in nickel as a basic ingrediënt for batteries.