The 36-Pound Curse Haunting Musk’s Gigafactory
Say what you will about Elon Musk, but you can’t deny the man is ambitious.
His mantra seems to be "go big or go home."
After revealing his latest plan to put a million people on Mars by 2050 and his dreams of building a fleet of 1,000 starships, even the sky isn’t a limit for him.
Yet, for all of his galactic ambition, there’s one thing he simply cannot shake down here on Earth.
I’m talking about a blood metal curse hanging over the head of every Tesla.
Not only did it weigh on him as he broke ground on Tesla’s first Gigafactory in Nevada back in 2014, but the curse gets heavier with each Model 3 to roll off the assembly line.
Unfortunately, he brought it on himself.
And the situation is about to get much worse for him.
Heavy is the head that wears the EV crown...
Tesla’s 36-Pound Blood Metal Curse
You can’t say we didn’t see this coming.
Thirteen months ago, Tesla broke ground on its third Gigafactory.
Located in Shanghai, China, this $5 billion plant is designed to pump out battery cells for the Tesla Model 3 car at a rate of 150,000 per year. Analysts also expect another 100,000 Model Y's to be produced here.
But like I just said, each one of these cars carries with it a 36-pound blood metal curse.
I have a feeling that a few members of our investment community know exactly what it is.
You know it as cobalt.
It’s one of the key ingredients of the batteries that are currently powering the EV revolution.
Each Model 3 created in those Gigafactories comes with a 1,200-pound battery, 3% of which is cobalt — and Tesla is better than most when it comes to its cobalt content!
However, there’s a very serious issue when it comes to getting it.
My colleague, Luke Burgess, laid out many of the concerns over the world’s cobalt supply recently, but let me give you a quick recap of the situation.
Right now, global cobalt consumption stands between 130,000 and 140,000 metric tons; demand is expected to surge 20-fold over the next 10 years.
If it wasn’t clear by now, nearly half of global supply is used in batteries. In countries like China, batteries can account for up to 80% or more of cobalt demand.
Keep in mind that more than 40% of lithium-ion batteries will be used in electric vehicles this year, with the rest being used in other products, such as portable electronic devices like phones and such.
Even though most of today's cobalt supply is a by-product of nickel mining, nearly two-thirds of cobalt production occurs in one place: the Democratic Republic of the Congo.
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And that, dear reader, is where the trouble begins.
You see, over 20% of the Congo’s cobalt production comes from illegal mines, which comes out to around 13% of global supply.
UNICEF has reported that, in 2014, up to 40,000 children were working under the most horrid conditions imaginable.
But these stories of the terrible working conditions aren’t new; they’re just starting to make their way into the mainstream media.
Make no mistake: Tesla isn’t the only company with blood on its hands. Apple, Google, Microsoft, Dell, and the world’s largest tech companies all have a hand in this.
Today, these tech giants are learning their lesson the hard way. A lawsuit against several of the companies I mentioned is currently underway in an attempt for them to bear some of the responsibility for this blood metal supply.
The world is finally waking up to where our cobalt comes from, and that is going to open a lot of doors for a small group of early investors.
Understand that for all the latest talk of creating cobalt-free car batteries, the current generation of lithium-ion batteries used in today’s EVs can’t shake the need for cobalt — not yet, at least.
Even Elon, who’s committed to a cobalt-free battery in the future, is shackled to it.
Tesla is looking to ink a long-term supply deal with Glencore, one of the world’s largest cobalt producers, despite the fact that Glencore recently closed its Mutanda mine (the world’s largest cobalt mine) in the DRC.
Think of how valuable it would be for Tesla to find a cobalt supply a little closer to home.
Oh, it's out there.
In fact, I’ll show you one company on the verge of selling its ethical cobalt to the world very, very soon.
And the best part is that it’s happening right in Musk’s backyard.
Until next time,
A true insider in the energy markets, Keith is one of few financial reporters to have visited the Alberta oil sands. His research has helped thousands of investors capitalize from the rapidly changing face of energy. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital as well as Investment Director of Angel Publishing's Energy Investor. For years, Keith has been providing in-depth coverage of the Bakken, the Haynesville Shale, and the Marcellus natural gas formations — all ahead of the mainstream media. For more on Keith, go to his editor's page.
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