To produce EVs, you need batteries. To build batteries, you need lithium. That’s why Tesla has signed a long-term contract with a pair of mining companies to supply lithium hydroxide from a site in northern Mexico.

Bacanora Minerals Ltd and Rare Earth Minerals PLC are partners in a joint venture called the Sonora Lithium Project. They are “working to develop a mineral-rich, lithium-bearing clay deposit into a low-cost sustainable and environmentally conscious mining operation,” according to a press release. “It is estimated that the mine and processing facility will have an initial production capacity of approximately 35,000 tons of lithium compounds, with scaling potential of up to 50,000 tons per annum.”

During the five-year term of the agreement, Tesla will purchase agreed minimum quantities of lithium below current market prices, subject to certain conditions regarding project execution and product quality. The first step will be for the partners to secure financing to build “a suitable mining and processing operation.” Tesla “has the right to participate” in financing the project.

“This key supply agreement with Tesla will hopefully be the first of a number of potential lithium off-take partners as we move towards the next stages of project development,” said Sonora Lithium Project Executive Chairman David Lenigas.

Sources: Sonora Lithium Project, Wall Street Journal