Electric cars maker Tesla聽(NASDAQ: TSLA)聽will become a technical adviser at the conflict-ridden New Caledonia nickel mine, as part of the company鈥檚 attempt to secure enough supply of the key battery metal, which CEO Elon Musk has singled out as his biggest concern.
Political leaders in the French Pacific territory agreed on Thursday to sell a majority stake in Vale鈥檚 nickel business to a consortium called Prony, which includes Swiss commodity trader Trafigura.
The Brazilian miner, the world鈥檚 top nickel producer, had been on the hunt for a buyer for over a year, but the sale was complicated by the fact that New Caledonia has been debating getting its independence from France, and where nickel is one of their main sources of wealth.
The agreement inked on Thursday, , gives a 51% stake in the Vale (NYSE: VALE) operation to New Caledonia鈥檚 provincial authorities and other local interests. Trafigura will have a 19% stake, less than the 25% planned in the initial sale deal with Vale.
New Caledonia is one of the world鈥檚 largest nickel producers, but last year鈥檚 protests by groups seeking independence from France for the island delayed Goro mine鈥檚 sale
The parties also called for reinforced environmental standards and set a target for the mining complex to be carbon neutral by 2040.
The move seeks to put an end to violent protests over the planned sale of Goro nickel-cobalt mine, which forced Vale to shut down the site in December.
The company decided to walk away from the ailing nickel operation in late 2019 due to mounting issues, including a $1.6 billion write-down related to the mining complex.
Click here for an interactive nickel price chart
New Caledonia is one of the world鈥檚 largest nickel producers, but last year鈥檚 protests by groups seeking independence from France for the island delayed the sale.
Vale Nouvelle Cal茅donie (VNC), which includes the Goro mine, a processing plant and the port of Prony, proved a financial burden for Vale聽since it began operations聽two years behind schedule in 2010.
While Goro has the capacity to produce 60,000 tpy of nickel in the form of nickel oxide, it has never performed to full capacity due to design flaws and operational commissioning issues.
In 2019, the mine churned out just 23,400 tonnes of nickel, slightly over a third of its annual capacity.
Getting cheaper
The price of nickel increased more than 25% over the last year due to supply concerns as demand for battery production is increasing.
At $16,290 per tonne, nickel futures on the LME have dropped by 13% in the past two days after China鈥檚 Tsingshan Holding Group, the world鈥檚 top stainless steel producer,聽announced it will begin supplying聽battery grade nickel matte to Huayou Cobalt Co and CNGR Advanced Material Co.
Matte is an intermediate product made from concentrate that can be further processed into battery-grade chemicals.
Tesla, which is named as 鈥渢echnical and industrial partnership鈥澛爄n the New Caledonia deal, recently indicated that it was planning to move into the mining business to secure resources for battery production.
The automaker has also聽secured lithium mining rights in Nevada and struck a deal to buy cobalt from Glencore (LON: GLEN). But it has shown the most concern about nickel, which is a big part of the cathode in lithium-ion battery cells.
惭耻蝉办听pleaded with miners聽last year聽to produce more nickel, promising a 鈥済iant contract鈥� for supply produced efficiently and in an 鈥渆nvironmentally sensitive way鈥� amid concerns that聽补听诲别蹿颈肠颈迟听濒辞辞尘蝉聽鈥� as early as 2023.