Lithium. Cobalt. Batteries.
Those are the hottest three words on the ASX today.
As it stands, Tesla Motors [NYSE:TSLA] expects to churn out 35 gigawatts of lithium-ion batteries per year at its Gigafactory in the US state of Nevada by 2018. If you haven’t heard of the Gigafactory, that’s OK. In short, the mega-factory should double the global battery production capacity next year.
Oilprice.com reported on 6 January:
‘The doubling of global battery production capacity could not only lead to an acceleration in the EV [Electric Vehicles] market, but it is also leading to a massive bull run for another sector: lithium.
‘According to the Financial Times, an electric vehicle uses 4,800 times the volume of lithium as a smartphone, so the acceleration of EV adoption is leading to very tight supply conditions for lithium. Lithium demand could rise by 16 percent annually through 2025, which, according to Morningstar, would be the fastest growth rate out of any other commodity in the past century.
‘Lithium prices exploded by 60 percent last year, and have tripled over the past three. While there are four main lithium miners in the world — SQM, Albermarle, FMC and Tianqi Lithium — smaller miners are starting to multiply. More than a few have popped up in Nevada, which is home to rich lithium deposits (it is not a coincidence that the Tesla gigafactory is located there).’
There’s plenty of potential for lithium-ion battery players. For that reason, lithium stocks continue to skyrocket. I’ve tipped what could easily become the world’s hottest lithium stock this year in my advisory service, Resource Speculator.
I’ve also tipped two of the hottest cobalt (an essential ingredient for lithium-ion batteries) stocks. One is up 90%, and the other is yet to run. Yet, strangely, it boasts some of the highest cobalt grades on the ASX. In that case, it may not be long until it starts to fly.
But, with plenty to talk about, let’s stick with lithium today — specifically, how it relates to the Tesla Gigafactory.
Winding back the clock
The Gigafactory is a gigantic feat. The construction cost is estimated at US$5 billion. Imagine what it takes to get a construction project of this scale up and running?
It’s not easy…
The construction blueprint was carefully designed. For starters, water is scarce in Nevada — the home of the mega-factory. The red, hot and dry desert could make the hardiest construction workers wither within hours. Not to mention their machines.
Water is a necessary part of the plan. To solve the issue, lots of water is piped from a treatment plant in neighbouring Washoe County. A 5.7-million-litre water tank is also used onsite. That’s the size of about two Olympic swimming pools.
Cranes, surveyors, and earth-moving equipment continue to occupy the site today. The project should employ more than 3,000 workers at peak construction, and more than twice that number on completion.
The final product should be a sight for sore eyes…
It will be shaped like a diamond, with solar panels on the roof. It will take thousands of solar panels to power the project. The first solar roof panels cost about US$4.5 million, according to Business Insider Australia. Take a look at the project’s solar roof in November 2016:
[Click to enlarge]
You can see it needs a lot more solar panels. The solar-power generation capacity should total about 70 megawatts once complete. For the record, one megawatt can power almost 2,000 homes.
The solar roof will be about seven times larger than any other rooftop installation in the world. It’s going to set world records for renewable energy. And it’s (mostly) coming along as planned.
On completion, expected in 2020, the project is expected to cover an area equivalent to about 107 football fields. Here’s what the final structure should look like:
[Click to enlarge]
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Looking beyond the future
Tesla plans to manufacture 500,000 electric vehicles per year by 2018. Tesla’s products — the Model S, Model X, the up-and-coming Model 3, and the Powerwall — all require batteries to function. The Gigafactory creates lithium-ion batteries to power these products.
Tesla wants to transition the world to sustainable energy. To achieve that goal, it needs to produce enough electric vehicles to disrupt the automobile industry. If it wants to produce 500,000 cars per year, Tesla needs more than the entire world’s annual production of lithium-ion batteries. The Tesla Gigafactory was born of necessity. It will supply enough batteries to change the world.
Tesla believes its battery facility will be operating at full capacity by 2020. At peak production, the Gigafactory should employ 6,500 workers, creating between 20,000 and 30,000 additional jobs in the surrounding regions. (So much for technology stealing jobs!)
Now, I’ve only told you a fraction of the story today. Tesla’s Gigafactory could see further expansion plans announced this year, which I analysed in Resource Speculator last month. In short, it comes down to Donald Trump’s policies and Elon Musk — the founder and CEO of Tesla.
But, regardless of what happens, the Gigafactory doesn’t offer the most potential. The lithium stock I tipped inside Resource Speculator, however, does.
This lithium stock isn’t only a promising, underappreciated lithium company — it’s based in Nevada. I truly believe this company could be supplying Tesla with lithium in the years ahead. For now, while there’s no shortage of global lithium reserves, you should know that there isn’t a huge amount of lithium produced in the US.
Massive profit potential up for grabs
There’s only one producing lithium-brine project in the US — the Silver Peak Mine located in Clayton Valley, Nevada. Silver Peak is controlled by Albemarle Corporation [NYSE:ALB]. Albemarle is one of four conglomerates controlling much of the world’s lithium supply — it owns a lot of lithium in Chile.
Unfortunately for Albemarle, Silver Peak is approaching the end of its lifespan. And when Silver Peak stops producing in the next couple of years, who will supply Tesla?
That’s the billion dollar question. And it’s one I drill into extensively in my new report on lithium and cobalt’s sky-high potential. You can read the report, and discover what I believe will become the hottest lithium stock in the world, here.
Editor, The Daily Reckoning
Editor’s Note: Could these three Gigastocks make you over a million dollars?
From stakes as little as $3,000?
That’s the intriguing premise behind a new research project I (Bernd) have been talking to you about this week. It’s called ‘The Gigastock Phenomenon’.
And if you haven’t learned all about these three stocks, you should make sure you bring this research up on your screen before it’s taken down.
We’re talking tiny stocks here.
With immense upside…but, of course, also downside potential.
With prices so prone to shifting quickly, these three 100-plus-bagger-potential Gigastocks could be soaring in a matter of days, or even hours. Or stopped-out just as quickly.
As soon as one or more of these plays moves out of its buy-price range, we’ll likely put this research back behind the security curtains.
Don’t kick yourself for being too slow here.
As David Fessler of Energy & Resources Digest says this is ‘a 100-bagger sector… In my entire career, I’ve not seen anything this exciting…’