Is Tesla looking for its gold mine with Glencore?
Tesla, which already plans to build a lithium hydroxide refinery on the Texas Gulf Coast, could acquire 10-20% of the shares of Glencore, the Anglo-Swiss mining giant, supplier of GM and BMW
According to the Financial Times , which heard from "two people familiar with the matter", the American electric car manufacturer Tesla is about to acquire 10-20% of the shares of Glencore, the Anglo-Swiss mining giant engaged in the production of cobalt, nickel, copper and other minerals (but not lithium) and also active in battery recycling.
DOES TESLA WANT GLENCORE?
The negotiation was born in 2021 and continued in March of this year, after a visit by Gary Nagle , CEO of Glencore, to the Tesla plant in Fremont . The dialogues, reconstructs the City newspaper, had then stopped due to concerns of Elon Musk and associates related to the company's coal mining, which would risk impacting the environmental targets of the House.
Price of lithium has gone to insane levels! Tesla might actually have to get into the mining & refining directly at scale, unless costs improve.
There is no shortage of the element itself, as lithium is almost everywhere on Earth, but pace of extraction/refinement is slow.
— Elon Musk (@elonmusk) April 8, 2022
Still, Musk hasn't stopped thinking about those mines. Glencore PLC, a Swiss multinational of the Glansenberg family, with a market capitalization of more than 60 billion, owns about a third of cobalt supplies through its subsidiaries in the Democratic Republic of Congo, Australia and Canada. Tesla had already knocked on the Glansenbergs' door two years ago to sign an agreement to supply its gigafactories in China and Germany with 6,000 tons of cobalt a year.
However, it is not the first time that Tesla has hinted at its intention to take one or more steps further to take part in that sector as well. Last spring, obviously on Twitter, the patron of electric mobility tweeted: “Lithium prices have skyrocketed! Tesla may be forced to go straight into mining and refining at scale unless costs improve.”
The Twitter affair, which is now chirping from the hands of Musk himself, should teach us that there is a very blurred limit, for Tesla's CEO, between jokes and serious intentions. Tesla, which already plans to build a lithium hydroxide refinery on the Texas Gulf Coast, would make the German gigafactory just outside Berlin the heart of this possible deal with the Swiss entity. After all, the electric car is redesigning the automotive supply chain in a global sense and there are many car manufacturers that enter into agreements directly with the mining giants. Agreements that could be the antechamber of corporate shareholdings.
TESLA NUMBERS
The House of the EV car closed the third quarter, the one from July to September, with revenues exceeding 20 billion dollars for the first time in its history: to be precise, 21.45 billion, up 56% on the same period of last year and a marked improvement compared to the first part of the year, when various slowdowns in China, due to a few backlashes of Covid, had blocked production in the maxi factory in Shanghai, the heart of the industrial strategy expertly set up by Musk.
In short, Tesla remains a splinter: if between the first three months and the following three the turnover had dropped from 18.756 billion to 16.934 billion, now it has leapt to 18.7 billion, with the contribution of the sale of environmental credits settling at 286 million, up 3% from a year ago, though less than half the first quarter's $679 million.
The income statement benefited above all from the containment of operating costs, which rose by just 2%, while the expenses of the automotive business, which went from 10.52 to 13.48 billion, did indeed grow but at a rate in line with that of revenues. The operating margin returned above 15%, rising from 14.6% to 17.2%, while the incidence of Ebitda on turnover was stable at 23.2%. Net profits also grew, improving 75% to $3.65 billion, with earnings per share up 69% to $1.05, just above the 99 cents expected by analysts. Finally, positive cash flows of 3.3 billion, almost triple the 1.33 billion a year ago, also thanks to investments of 1.8 billion.
DIGGING DEEP…
In short, everything perfect? Not really, because Tesla is currently burning record after record, but from certain heights it's always easier to crash on the ground. Among the unknowns that threaten the future of the South African entrepreneur's electric car, in addition to the problems, which have already emerged in recent days from an internal report, related to logistics , i.e. the transport of cars on ships and trucks, also those of the cost of materials firsts that could force the Colossus of Austin to adjust its price lists upwards.
Hence, precisely, the need to enter the extraction market directly as a player, so as to at least shorten the supply chain as much as possible. Also because in China, where the State is a shareholder of both car manufacturers and mines, that is in fact the rule and allows the Dragon brands to be particularly competitive when they arrive on Western markets.
And Glencore is undoubtedly a strategic objective for Tesla, given that the Anglo-Swiss reality has already signed agreements with Korean battery manufacturers, such as SK Innovation and Samsung SDI, as well as refueling agreements with other car manufacturers such as BMW and GM. In short, Tesla could find itself in the comfortable role of rival and supplier of the other automotive players.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/smartcity/con-glencore-tesla-e-alla-ricerca-della-sua-miniera-doro/ on Mon, 14 Nov 2022 06:12:48 +0000.