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Tesla becomes partner in New Caledonia nickel mine to address supply issues

Tesla's involvement is as a technical and industrial partner

Tesla Inc -
"Nickel is our biggest concern for scaling lithium-ion cell production" - Elon Musk

Tesla Inc (NASDAQ:TSLA) is to become a partner in a nickel mine in the French-controlled Pacific island of New Caledonia to ensure it has enough supplies.

Nickel is a key component in lithium-ion batteries, currently the main way to power electric cars.

Tesla’s chief executive Elon Musk has expressed concern about nickel supply previously with reports last year he was in talks with miner Vale about securing supplies.

Until yesterday, the Brazilian group owned the Goro mine in New Caledonia where Tesla is to become a partner, but control is to be split between the local community, regional governments and private mining group Trafigura after a new deal was agreed.

Tesla said its involvement is as a "technical and industrial partner" to help with product and sustainability standards, but it will not have a stake.

Nickel production is regarded as very environmentally damaging and Musk has offered to reward producers who can mine in a more sustainable way.

Last year he urged nickel miners to produce more but in a more environmentally friendly way, though one of the problems is finding enough refining capacity to produce the right quality.

“Tesla will give you a giant contract for a long period of time if you mine nickel efficiently and in an environmentally sensitive way,” he said in a press call after an earnings announcement.

The new agreement at Goro includes reinforced environmental standards and a target for the mining complex to be carbon neutral by 2040.

Russia, Indonesia, Canada and New Caledonia are the world’s main sources of nickel currently, with Goro having potential to increase.

Vale said the deal would "enable the operations to continue with a sustainable path for the future, preserving jobs and delivering economic value to the country".

Tesla has been ramping up its supply chain connections ahead of the shift towards mass adoption of electric cars with rumours it considering building a lithium-ion battery giga-factory in Somerset.


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