The Cobalt Cliff, Two Dire Warnings And A Musk Soliloquy

Nov. 23, 2017 10:00 AM ETTesla, Inc. (TSLA)187 Comments
John Petersen profile picture
John Petersen


  • Volume 1 Issue 2 of Joule features “Lithium-Ion Battery Supply Chain Considerations: Analysis of Potential Bottlenecks in Critical Metals” - an MIT-Berkeley report that confirms my cobalt supply and demand thesis.
  • A recent Nick French interview on Palisade radio also confirms most of the cobalt supply and demand facts I’ve summarized over the last 18 months.
  • After responding to the last caller’s question in Tesla’s Daliesque Q3 earnings call, Elon Musk launched into a cobalt supply soliloquy that was abruptly aborted by JB Straubel.
  • The soliloquy did, however, last long enough to confirm my belief that Tesla was less than scrupulous in conducting its Gigafactory due diligence.

Based on the materials discussed below and my prior discussions of cobalt supply and demand dynamics, I believe the cobalt cliff thesis I proposed in March 2016 is no longer debatable and Tesla’s (NASDAQ:TSLA) management and board were negligent, if not grossly negligent, in starting Gigafactory construction without secure supply chains for cobalt and other critical technology metals.

Since this is a holiday weekend, I’m going to refer readers to my source materials and limit my observations on what those materials say. I strongly encourage everybody to follow the links, read the reports, listen to the recorded interview and then think about how the Cobalt Cliff will impact Tesla and all non-Chinese players in the EV and lithium-ion battery space.

MIT-Berkeley Supply Chain Report

Volume 1 Issue 2 of Joule, a new journal that focuses on ground breaking energy research, featured “Lithium-Ion Battery Supply Chain Considerations: Analysis of Potential Bottlenecks in Critical Metals” - an MIT-Berkeley study that was partially funded by the National Science Foundation and confirms the core of my cobalt supply and demand thesis.

The principal researchers for the study were Elsa Olivetti, the Atlantic Richfield Assistant Professor of Energy Studies at MIT, and Gerbrand Ceder, the Chancellor’s Professor of Materials Science and Engineering at Berkeley.

While the MIT-Berkeley study was very comprehensive, it did overlook three points that I discussed last week in a conference call with Professors Olivetti and Ceder:

  • First, the research team missed the fine point that only 75% to 80% of the cobalt contained in mined ores leave the refinery in useful form. While a 20% to 25% process shrinkage is quite rare, anybody can quickly confirm the facts by comparing the global totals in Tables 8 (mine production) and 9 (refinery production) of the 2015 USGS Cobalt Minerals Yearbook.
  • Second, the report

This article was written by

John Petersen profile picture
I'm a lawyer and accountant who's devoted the last four decades to advising entrepreneurs on corporate finance, SEC registration and reporting, and corporate governance matters. All of my client projects have involved high levels of uncertainty, compressed timelines, and urgent financial needs that demanded unparalleled responsiveness. I know how to get major projects completed on time and within budget. I'm a 1979 graduate of the Notre Dame Law School and a 1976 graduate of the W.P. Carey School of Business at Arizona State University. I was admitted to the State Bar of Texas in 1980 and subsequently licensed to practice as a CPA in 1981. While I don't hold myself out as a practicing accountant, I regularly use my in-depth knowledge of accounting methods, processes, and procedures to offer nuts and bolts counsel to clients who need integrated advice on finance-driven legal matters.As general counsel for the C Change Group, I'm involved in all of that company's domestic and international initiatives.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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