By Rupert Hargreaves - Friday, 28 August, 2015 | More on: BCNREM

Directors

David Lenigas (aged 50), Executive Chairman

David Lenigas has extensive experience operating in global public markets having served in a senior executive capacity on many public company boards. He is currently the Executive Chairman of AfriAg Plc and Solo Oil Plc. He has a Bachelor of Applied Science (Mining Engineering) from Curtin University's Kalgoorlie School of Mines. Mr Lenigas has extensive operational and corporate experience in managing companies within the oil and gas, gold, coal and other natural resources sectors. Mr Lenigas is the Chairman of both the Audit and Remuneration Committee.

Mr Lenigas is a member of the Remuneration Committee.

Donald Strang (aged 45), Finance Director & Company Secretary

Mr Strang is a member of the Australian Institute of Chartered Accountants and has been in business over 20 years, holding senior financial and management positions in both publicly listed and private enterprises in Australia, Europe and Africa. Mr Strang has considerable corporate and international expertise and over the past decade has focussed on mining and exploration activities. He is currently the Finance Director of Polemos plc, Stellar Resources plc and AfriAg plc and is the Non-Executive chairman of Doriemus plc.

Mr Strang is a member of the Audit Committee.

Kiran Morzaria (aged 41), Director & Chief Executive Officer 

Mr Morzaria holds a Bachelor of Engineering (Industrial Geology) from the Camborne School of Mines and an MBA (Finance) from CASS Business School. He has fourteen years of experience in the mineral resource industry. Mr Morzaria spent his first four years in exploration, mining and civil engineering. Mr. Morzaria has been active in IPOs, corporate acquisitions, joint ventures, qualified persons reports, due diligence and debt/equity raisings. He has served as a director of a number of public companies, including Lonrho plc and Vatukoula Gold Mines plc.

Adrian Fairbourn (aged 42), Non-Executive Director

Mr Fairbourn began his career as an investment analyst before moving to build and manage the highly successful alternative fund-of-funds operation at the Bank of Bermuda, prior to the purchase of the bank by HSBC. For the four years up to 2007 he co-managed a multi-family office in London, responsible for hedge fund investments, direct investments and also asset-raising for co-investment opportunities. He has successfully assisted in over $1billion of structuring, capital and fundraising projects for several private companies and alternative funds. Since starting Exception Capital, Mr Fairbourn spent two years in Shanghai working on a number of company specific situations and helping lift out the Chinese Private Equity team from Temasek, the Singapore Government Sovereign Wealth Fund, into their own entity from where they raised $950m for their first fund. Now back in London, Mr Fairbourn is working on a number of opportunities as well as managing the family assets for a high net worth Italian family.

Mr Fairbourn is Chairman of both the Audit and Remuneration Committee.

Andrew Suckling (aged 43), Non-Executive Director

Rare Earth Minerals (LSE: REM) and BACANORA MINERALS (LSE: BCN) are surging this morning after the two partners announced that they have signed a lithium supply deal with Tesla Motors. 

On the condition that Rare Earth and Bacanora’s Sonora lithium project in Northern Mexico reaches certain performance milestones during the next two years, Tesla will buy lithium hydroxide to feed the manufacturing of batteries at its Gigafactory in Nevada.

One of the conditions attached to the deal will be that the Sonora project has to be able to produce lithium hydroxide in accordance with the parameters determined by Tesla. 

The deal between Rare Earth, Bacanora and Tesla will last for five years, starting from when Tesla places its first order. There’s an option to extend the contract for a further five years. 

Commenting on the deal, Rare Earth Chairman David Lenigas said:

“The selection of the Sonora lithium project as one of the lithium suppliers to the Tesla Gigafactory is a landmark transaction that will support the development and commercialisation of the Sonora lithium project. This key supply agreement with Tesla will hopefully be the first of a number of potential lithium off-take partners for the Sonora lithium project…”

A big deal

There’s no doubt that this deal between Rare Earth, the company’s partners, and Tesla is a big deal. 

Tesla Motors designs and manufactures premium electric vehicles, which have gained a reputation for being the best electric cars in the world. Tesla’s newest model, the P85D, an all-wheel-drive version of the battery-powered of the company’s Model S car, has recently earned a 103 out of a possible 100 in an evaluation by Consumer Reports magazine, setting a new standard for comfort, quality, reliability and overall perfection. 

And to meet the rising demand for its vehicles Tesla is building a $5bn Gigafactory in Nevada, which will be able to supply enough batteries to meet the projected demand for Tesla’s vehicles. Along with strategic partners such as Panasonic, the Gigafactory will help reduce the cost of manufacturing batteries by around 30%. 

Tesla’s Model S uses around 7,000 lithium-ion batteries, and Tesla is planning to produce 500,000 cars per year in the latter half of this decade. So, the company needs a reliable lithium supplier to feed production at its Gigafactory. The factory is set to commence production during 2017 and reach full capacity by 2020. 

A long way to go

A deal with Tesla is a game-changing development for Rare Earth, but the company still has a lot to do before the contract translates into revenue. For example, today’s press release warned that:

“…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.”

What’s more:

“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.”

In other words, while Rare Earth and Bacanora may have a provisional agreement with Tesla, there’s no guarantee that the partnership will register any economic benefit from the deal.