Bacanora Minerals and Rare Earth Minerals Sign Supply Agreement with Tesla

Bacanora Minerals (TSXV:BCN) and Rare Earth Minerals PLC (AIM:REM) announced that a conditional long-term lithium hydroxide supply agreement with Tesla Motors, Inc. has been finalized. Under the agreement, one of the key milestones will be the confirmation that the Sonora Lithium Project will be able to supply lithium hydroxide in accordance with volumes and timeframes to be established by Tesla. In the first 5 years, Tesla will purchase agreed minimum tonnages, subject to certain terms and conditions related to project execution, product quality, pricing and timing of delivery.
As quoted in the press release:

On the condition that, over the next two years, the Sonora Lithium Project reaches certain performance milestones and successfully passes product specification qualifications, Tesla – or its authorized purchasers – will buy lithium hydroxide to feed the manufacturing of batteries at Tesla’s Gigafactory in Nevada. One of the key milestones will be the confirmation that the Sonora Lithium Project will be able to supply lithium hydroxide in accordance with volumes and timeframes to be established by Tesla. The Supply Agreement has an initial five year term commencing from the date of the first order by Tesla, with an option to extend for a further five years.
During the initial five years, and subject to certain terms and conditions in relation to project execution, product quality, pricing and timing of delivery, Tesla will purchase agreed minimum tonnages, with estimated forecasted maximum deliveries to be determined following delivery of future production orders from Tesla. Tesla will purchase minimum quantities in accordance with an agreed upon pricing formula, below current market pricing, with actual prices and volumes that can only be finalized during the development phase in due course. The forecast tonnages and delivery dates are structured to coincide with Tesla’s forecasted Gigafactory production. This agreement will form a portion of Tesla’s anticipated lithium-based feedstock needs; the remainder of which is expected to come from other lithium peers.
To meet both Tesla’s minimum and forecasted tonnages and timelines and any other potential market demands, the Sonora Lithium Project Partners will need to design and construct a suitable mining and processing operation. This will require the Sonora Lithium Project Partners to secure significant financing through debt and/or equity. Tesla has the right to participate in any such financing or other capital transactions. Bacanora and REM will be pursuing next steps to raise finances in order to achieve this goal. There can be no assurance that the conditions to supply product under the Supply Agreement will be met or that the agreement will prove to be economic.