--UPDATE, ADDS MANAGEMENT AND BROKER COMMENTS--
Securing a supply deal with electric car firm Tesla is a massive coup for Rare Earth Minerals’ (LON:REM) Sonora lithium project in Mexico, says chairman David Lenigas.
REM, in conjunction with its joint venture partner Bacanora Minerals (LON:BCN), has signed up the electric car giant and battery behemoth as a potential customer for lithium mined from Sonora.
Of course REM and Bacanora will have to get a mine built at Sonora first before they can supply Tesla, but having said that Tesla hasn’t finished what’s become known as its lithium “Gigafactory” yet either.
Tesla also now “has the right” to participate in any financing to get the mine at Sonora built, REM added.
Whether Elon Musk’s car maker actually will participate or not probably depends on the results of ongoing tests, pre-feasibility work and other economic studies.
The plan is for Tesla to buy lithium hydroxide from Sonora, on condition that it passes certain product specifications and that supply can be delivered in sufficient volume.
With that in mind, REM has now said it will revise its estimates of capital and operating costs to take into account the new product mix that will be required to service Tesla’s needs.
Lenigas, on Twitter, said: “This morning's REM news on Tesla is a massive Coup and other suppliers may well scratch their heads when they get around to finding out.
“I love playing chess and doing interesting deals that mean something. Not check mate yet. But nearly I hope,” the deal maker added.
REM shares, on AIM, jumped 0.2p or 22% to trade at 1.1p, whereas Bacanora gained 17.5p or 25p to 87.5p.
Yuen Low, mining analyst at Shore Capital, in a note said: “We view this agreement as a key step in the commercialisation of Sonora, and we expect will make the raising the funds for its construction very much easier.
“We believe that the on-going pre-feasibility study to be fully-funded (which we are expecting by end 2015 or early 2016), but that additional funds will be required for the subsequent Bankable Feasibility Study.”