Vancouver junior's Tesla-inspired surge evaporates
Shares in Pure Energy Minerals Limited (CVE:PE) jumped as much 28% at the start of trading on the Toronto Venture Exchange on Wednesday after announcing a supply deal with electric vehicle manufacturer Tesla Motors.
After an initial trading suspension was lifted, cooler heads prevailed with the Vancouver-based junior giving up most of those gains – even briefly dipping below yesterday's price – to trade at $0.81 up just 1.2% near the close.
More than 4.3 millions shares in the $39 million company changed hands – almost 10% of its outstanding stock – making it the most active counter on the venture board.
Pure Energy announced the "potential supply" of lithium hydroxide it plans to produce at a lithium brine project in the Clayton Valley in Nevada to Tesla's so-called gigafactory in the state.
Pure Energy will now "conduct a mining study in the form of a Preliminary Economic Assessment, Pre-Feasibility Study or Feasibility Study to confirm the technical feasibility and economic viability of the project." The Clayton Valley project boasts 816,000 metric tonnes lithium carbonate equivalent (LCE) inferred resource according to a July 2015 NI 43-101 report.
The project is located next to Albemarle's (NYSE:ALB) Silver Peak lithium brine mine, the only producing lithium operation in the country which is undergoing expansion.
Tesla and its CEO Elon Musk has been under pressure to sign a supply deal in Nevada after coming under fire for opting for lithium sourced from Mexico in a deal announced at the start of the month. Tesla was given $1.3 billion in tax breaks and subsidies by Nevada to locate the battery factory inside the US state.
According to the statement by Pure Energy there are a number of caveats to the deal which apart from seeming very preliminary in nature also commits the company to sell its lithium below market rates:
"Provided that Pure Energy meets certain terms and conditions related to project execution, product quality and timing of delivery, the Agreement establishes a commitment for an annual purchase volume of product over a period of 5 years by Tesla and/or its authorized purchasers.
"The Agreement sets a predetermined price that is below current market rates and is aligned with Tesla’s goal to continuously reduce the cost of its lithium ion batteries. It is proposed that the Product will be used in the battery cell manufacturing process of Tesla’s rapidly growing electric vehicle and stationary storage business units, which are located approximately 3.5 hrs. drive from the Project.
"Any deliveries from Pure Energy will cover a portion of Tesla’s needs with the remainder to come from other sources."