Warren Buffet’s Berkshire Hathaway (NYSE: BRK.A) has made a move to enter the Lithium markets, working on an agreement that would allow extraction of the essential battery mineral from geothermal wells in California and help secure supply for US car manufacturers. Used mainly in electric car batteries as a much-needed resource by companies like Tesla, the move would help ease supply restrictions of the vital mineral.
The new venture promises to produce up to 90,000 tonnes of lithium carbonate annually from the company’s Salton Sea geothermal plants. Worth approximately $1.5 billion according to a fundraising document, the company has revealed that it has been in discussion with US carmaker Tesla to secure a steady supply of lithium for their electric car batteries. Although not confirmed yet, should the project be successful, it would offer US manufacturers a highly coveted domestic supply of the metal while reducing reliance on a handful of international exporters in Australia and Chile. At the moment, the only other US producer is located in the Silver Peak mine in Nevada, owned by Albermarle (NYSE: ALB).
“We see a lot of interest in getting North American supply as automakers start to get further into electric vehicles,” said VP Eric Besseling of BHE Renewables, a part of Berkshire Hathaway Energy. “With the cost curve coming down so dramatically for other renewables we’ve got to get more competitive. The lithium is worth five times the value of the power.” He added that while the company was in talks over a potential extraction agreement, the firms had yet to complete their financing. At the same time, an official spokeswoman for Berkshire Hathaway Energy said there was no agreement in place as of yet.
While Buffet’s company has expressed interest in the Salton Sea Geothermal plants, with some reports saying that it has the “potential to become one of the world’s largest lithium resources rivaling the Lithium Triangle in Chile and Argentina,” this isn’t the only time big-figure investors expressed interest in a potential acquisition. Back in 2014, Tesla made a $325 million offer to acquire a company looking to extract lithium in the area, but the offer was rejected. Even as far back as 2000, Berkshire has attempted to extract minerals from the Salton Sea area, with a proposed arrangement to produce zinc from the region 19 years ago failed to come through.
While Lithium prices have dropped 17 percent over the past year as new Australian sources have entered the market, analysts still expect the demand for the metal to double by 2025 with the advent of more affordable electric cars inching closer to becoming a reality. However, initial projections for the Salton Sea plants show that, should the technology work, the production of Lithium could reach such low costs rivaling that of Chile, which currently has the world’s lowest production costs.
At the same time, the prospect of selling lithium produced from the geothermal brine as a secondary product would help make geothermal power less expensive and potentially elevate it in competitiveness to other renewable sources like solar and wind.
Only time will tell whether this particular deal will come through, but manufacturers and mining analysts alike will be paying close attention to this deal in the future.
