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Tesla Secures Long-Term Nickel Supply Through New Caledonia Partnership

Tesla secures a steady supply of nickel used in the production of their electric vehicle batteries by partnering with a nickel mine in New Caledonia.

This story originally appeared on ValueWalk

Tesla has secured a long-term supply of nickel to use in the manufacturing of batteries for its electric vehicles. According to Reuters, the automaker is listed as a “technical partner” in a deal to take over a nickel mine in New Caledonia. However, like Tesla stock, the nickel mine is big and controversial.

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Mine in turmoil

New Caledonia's political leaders agreed to new terms for the sale of the nickel business owned by Vale. The terms of the deal include a majority stake for local interests, which seeks to resolve turmoil over the planned sale of the mine.

Pro-independence and loyalist leaders in the French Pacific territory also referred to a "technical and industrial partnership" with Tesla, which would allow the automaker to use nickel from the mine for its EV batteries.

Brazil-based miner Vale decided last year to sell its nickel mine and processing plant to a consortium, which included Swiss commodity trader Trafigura. Pro-independence groups vehemently opposed the decision, leading to violent protests that caused Value to shutter the site in December.

Details on the agreement

Under the terms of the agreement struck Thursday, political groups wanted New Caledonia's provincial authorities and other local interests to hold a 51% stake in the Vale operations. Trafigura would receive a 19% stake, less than the 25% the company was previously expected to have.

The deal also includes reinforced environmental standards and set a target for the mining operations to be carbon neutral by 2040. Vale has been attempting to sell its assets in New Caledonia for years. It has said that about 3,000 direct and indirect jobs depend on the mining operations restarting.

Why Tesla wanted to secure nickel

Electrek reports that recently, Tesla CEO Elon Musk has been calling on nickel producers to increase production. He expects shortages in the metal to become an issue for battery production. It seems likely that Musk's concerns about nickel are the main reason Tesla decided to get into mining the metal.

Under the deal, Tesla would be an industrial partner and assist with product and sustainability standards while also taking some nickel from the operations for its battery production. Nickel demand is expected to increase due to the rising demand for EV batteries.

New Caledonia is the fourth-largest producer of nickel in the world. It's estimated that the territory holds about 25% of the nickel in the world.

Tesla is part of the Entrepreneur Index, which tracks 60 of the largest publicly traded companies managed by their founders or their founders' families.