Lithium Producers for Tesla's Batteries to Get a Dedicated Hedge Fund
【Summary】The increasing sales of electric vehicles (EVs) has led to rapidly increasing demand for lithium. As a result, the financial industry is stepping up to help investors looking to cash in on the demand.
Westbeck's fund will target opportunities among more than 200 companies with a combined market capitalization of about $650 billion.
Tesla Motors founder and chief executive Elon Musk once said that lithium was only the "salt on the salad" for the batteries that are vital to the company's electric cars. He was referring to lithium salts, a raw material that is mined to make lithium-ion batteries. However, Musk was downplaying the role of lithium in Tesla's batteries —lithium is a vital component for the company's battery production.
The increasing sales of electric vehicles (EVs) has led to rapidly increasing demand for lithium. As a result, the financial industry is stepping up to help investors looking to cash in on the demand.
Will Smith, a former partner at Michael Hintze's investment firm CQS U.K., is starting a dedicated hedge fund that will bet on companies whose products and services will benefit from a boom in electric cars.
The Westbeck Electric Metals Fund is expected to begin trading next month and aims to raise a maximum of $250 million, according to a document seen by Bloomberg News. Smith, who was the head of natural resources at CQS before starting London-based Westbeck Capital Management in 2016, declined to comment.
Westbeck Capital Management is a London-based firm founded in February 2016 by Smith, formerly of CQS, Landsbanki Securities and Panmure Gordon, and Jean-Louis Le Mee formerly of Abydos Capital, BlueGold and Goldman Sachs.
Westbeck's fund will target opportunities among more than 200 companies with a combined market capitalization of about $650 billion. The firm has also tapped a former chief executive of a lithium company as an adviser for the fund, according to the document, which did not name the person.
Westbeck's existing energy fund has gained 20 percent through Jan. 12 this month after losing 17 percent last year, according to another document. The fund had gained 22 percent in 2016.
The King Valley mine in Nevada is one of the largest lithium mines in the United States. Nevada happens to be home of Tesla's new Gigafactory, soon to be the world's largest battery production facility.
However, much of the world's lithium currently comes from Chile, in South America. The country has abundant salar brines, which can be best described as underground reservoirs that contain high concentrations of dissolved salts, such as lithium, potassium, and sodium. These are generally found below the surface of dried lake beds, known as salars. The largest being the Atacama Salt Flat.
To extract lithium from brines, the salt-rich waters are pumped to the surface into a series of evaporation ponds where solar evaporation occurs over a number of months, leaving the dissolved salts behind. Salar brines naturally occur at higher altitudes and in areas of little rainfall, so solar evaporation is an ideal and cost-effective method for precipitating lithium salts.
An aerial view of the brine pools and processing areas of a lithium mine on the Atacama salt flat in Chile
Growing Demand for Raw Materials
Automotive companies, including Toyota, are scrambling to secure supplies of resources for electric car batteries, making miners of commodities such as copper, nickel, lithium and cobalt an appealing target for hedge funds. The end users include Tesla, which is jointly developing the world's biggest lithium-ion battery project.
While these batteries are used in many popular electronic devices, it's the growing popularity of electric vehicles (EVs) that has greatly increased the demand. Tesla's increasing production of its more affordable Model 3, which it began manufacturing in mid-2017, will add to this demand for lithium. The Model 3 has over 500,000 reservation holders waiting for the new electric car.
Westbeck's Electric Metals Fund might be promising opportunity for investors. Many commodity prices are in a slump, However, lithium stocks, mainly lithium mining stocks, have soared along with the price of the metal since early 2016 due to rising demand for rechargeable lithium-ion batteries to supply the electric car market.
Originally from New Jersey, Eric is a automotive & technology reporter covering the high-tech industry in Silicon Valley. Eric has over 15 years of automotive experience and a bachelors degree in computer science. These skills, combined with technical writing and news reporting, allows him to fully understand and identify new and innovative technologies in the auto industry and beyond. He has worked at Uber on self-driving cars and as a technical writer, helping people to understand and work with technology. Outside of work, Eric likes to travel to new places, play guitar, and explore the outdoors.
Chinese Electric Vehicle Startup Xpeng Motors Raises $400 Million in Series C Funding
Hyundai Develops the World’s First Active Noise Cancelling Technology for Passenger Vehicles
California EV Startup Lucid Motors Begins Construction on its Arizona Factory
Toyota & BYD Establish Joint Company in China for Electric Vehicle Development
Lyft is Encouraging People to Sell Their Vehicles for Ride-hailing Credit
NVIDIA Unveils its New Jetson Zavier NX, the World’s Smallest AI Supercomputer
Automotive Supplier DENSO Leads Series A Investment in Radar Startup Metawave
EV Startup NIO to Partner with Intel’s Mobileye on Self-Driving Cars
- Hyundai & Aptiv Form $4B Autonomous Driving Joint Venture
- U.S. Moving to Block California Vehicle Emissions Rules
- Mercedes-Benz Vision EQS Concept Is a Take on Modern Luxury
- Volkswagen CEO Claims Shift to EVs Won’t Impact Margins
- Bosch Inks Deal with China's CATL for 48-Volt Hybrid Vehicle Batteries
- Hyundai Envision Eco-Friendly Semi-Trucks With HDC-6 Neptune Concept
- Waymo Already Looking to Expand “Rider Only” Autonomous Taxi Service
- Automaker Renault Ousts its CEO in an Effort to Rebuild its Alliance with Nissan
- Lyft is Encouraging People to Sell Their Vehicles for Ride-hailing Credit
- First Electric Lexus Reported to Be City-Oriented Hatchback