Elon Musk is currently the richest person in the world, with Forbes pegging the Tesla (TSLA -0.43%) CEO's wealth at about $207 billion. That's four slots ahead of Berkshire Hathaway's (BRK.A -0.38%) (BRK.B -0.22%) Warren Buffett, who has a reported fortune of approximately $100 billion.
But Buffett seems to be way out in front of Musk when it comes to the gold rush-like "lithium rush" that's now underway across the United States and in other parts of the world. This might surprise some folks because it is Tesla's -- not Berkshire Hathaway's -- supply chain that's highly dependent upon the metal.
Lithium is used to manufacture the lithium-ion batteries that power electric vehicles. These batteries are also used in energy-storage products, such as Tesla's Powerwall units.
Image source: Tesla.
Surging prices and supply chain concerns have led to a lithium rush
Lithium's supply hasn't been able to keep up with its surging demand, which has pushed its price to record highs. Companies that use lithium are spending a lot more cash to obtain it than they did just last year. But their bigger concern is that they could be unable to source enough of the metal to meet their long-term production targets.
This concern is spurring some large users of lithium to sign long-term supply agreements with producers and explore obtaining their own sources of the metal. Buffett-backed Chinese electric vehicle giant BYD (BYDDY 0.66%), for instance, is reportedly in talks to buy six lithium mines in Africa.
Musk previously announced Tesla's plan to get into lithium mining
In September 2020 at Tesla's "Battery Day," Musk announced the company planned to enter the lithium mining space. He said Tesla had obtained the rights to 10,000 acres in Nevada where it intended to extract lithium from clay deposits using a proprietary process it had developed. Nevada would be an ideal location for Tesla to source lithium since it's home to the company's first massive battery factory, Gigafactory 1.
While Musk should never be underestimated, this goal seemed a huge stretch. No company at that time was extracting lithium from clay at commercial scale. Indeed, this still holds true, though Lithium Americas (LAC) is close to the commercialization stage at its lithium clay project in Nevada. Lawsuits by environmentalists and Native Americans, however, have been delaying the project's progress.
Tesla's plan to mine lithium in Nevada seems to be on hold or off the table. Of course, it's possible the company could be working on it in stealth mode.
Berkshire Hathaway's lithium exploration and development activities
Geothermal brine -- a byproduct of geothermal power production -- is at the center of the California lithium rush occurring at the Salton Sea. The state's largest landlocked lake, whose southern shore is located roughly 45 miles from the Mexican border, is home to 11 geothermal power plants. Ten of these are owned by Berkshire Hathaway Energy's (BHE) Renewables operating unit.
"BHE Renewables, which has received federal and state funding, is developing two demonstration plants near its geothermal plants: one for extracting lithium chloride from geothermal brine, which just came on line, and the other for converting the lithium chloride into battery-grade lithium hydroxide," as I recently wrote in an article on the Salton Sea lithium rush.
If BHE is successful in its efforts to develop a novel lithium extraction technique, it will be able to generate revenue from selling lithium, which should improve the economics of generating electricity from geothermal reservoirs.
