Tesla inks multi-year nickel supply deal with Prony Resources
Electric vehicle giant Tesla (NASDAQ: TSLA) has inked a multi-year nickel supply deal with New Caledonia鈥檚 Prony Resources, which guarantees the US carmaker about 42,000 tonnes of the metal needed to produce the batteries that power its EVs.
Prony, which bought the loss-making nickel and cobalt operations in the French territory from Vale (NYSE: VALE) earlier this year, said it鈥檚 targeting production of 44,000 tonnes of nickel by 2024. That’s about double the expected 2021 output.
The deal听was听negotiated by Swiss commodity trader Trafigura,听one of Prony鈥檚 main stakeholders, and it makes Tesla听by far the miner’s largest customer, CEO听Antonin听Beurrier听said in a statement.听
The South Pacific archipelago of New Caledonia, 1,200 km (750 miles) east of Australia, was gripped by riots over the sale process of Vale鈥檚 local business in February, with protesters saying a locally led offer had been unfairly overlooked.
Click here for an interactive nickel price chart
Vale Nouvelle Cal茅donie (VNC), which was the operator of the troubled Goro nickel-cobalt mine, proved to be a financial burden for Vale since it began operations two years behind schedule in 2010.
Mounting issues, including a $1.6 billion-write down related to the ailing mines, pushed the company to announce in 2019 its intention to听exit New Caledonia.听
Vale later cut its 2020 nickel production guidance to 200,000 鈥 210-000 tonnes per year from 240,000 tpy to account for the anticipated loss of VNC鈥檚 60,000-tpy output.
A few weeks later, the miner revealed it had received non-binding offers for VNC, which includes the Goro mine, a processing plant and a port.
Tesla was already associated with Prony as an adviser on product and sustainability standards. The move followed the EV maker鈥檚 announcement that it was planning to move into the mining business to secure resources for battery production.
Related read:听All the mines Tesla needs to build 20 million cars a year听
Prony is听one of the mounting听nickel suppliers听Tesla听has inked deals听with to secure supply of听the battery metal.听The list includes听mining giant听BHP听(ASX, LON, NYSE: BHP), which is investing heavily in听expanding operations听to meet expected soaring demand.听
Analysts estimate the nickel market could face a shortage as soon as 2023. The metal helps cram more energy into cheaper and smaller battery packs, allowing EVs to charge faster and travel farther between plug-ins.
Tesla boss Elon听Musk听promised last year a millionaire contract听to any company able to provide听the company听with sustainable nickel.听
Prony is 51%-owned by New Caledonia’s provincial authorities and other local interests, while Trafigura has a 19% stake, and the rest is held by a joint venture between Prony Resources management and investment firm Agio Global.
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