Tesla decided to become a technical partner in a nickel mine – needed for lithium-ion batteries that power electric cars.
Elon Musk’s auto company will also buy nickel from the Goro mine, on the tiny island of New Caledonia in the Pacific, to ensure its long-term supply.
The change comes amid growing concerns about the future supply of nickel.
New Caledonia is the world’s fourth largest nickel producer, which saw a 26% rise in prices last year.
“Nickel is our biggest concern for increasing the production of lithium-ion cells,” said Musk on Twitter last month.
New Caledonia is French overseas territory, although it has seen increasing demands for independence.
What is the Goro mine?
New Caledonia’s huge nickel reserves are crucial to the local economy, and the Goro mine in the south of the island has the potential to be one of the largest nickel producers in the world.
In December, its owners, Brazilian mining giant Vale and the French state, tried to sell it to Swiss commodities trader Trafigura.
Residents were so irritated by the loss of property and local control that it caused the collapse of the New Caledonia government and led workers to strike.
A new agreement signed on Thursday by pro-independence groups, loyal parties and indigenous Kanaks will see the mine sold to a consortium that now includes officials, as well as three regional provinces. Trafigura will have only 19%.
Tesla will be involved in a “technical and industrial partnership” to help with product and sustainability standards along with obtaining nickel for its battery production, according to the agreement.
He will play the role of technical consultant in the design and improvement of the manufacturing process.
Vale said the deal will “allow operations to continue on a sustainable path for the future, preserving jobs and delivering economic value to the country”.
Greater control
Although Tesla does not have an equity stake, its partnership at the mine gives it greater control over its electric battery supply chain as production increases.
Nickel is mined mainly from Russia, Canada, New Caledonia and Indonesia and used mainly to make stainless steel. But the growth of electric vehicles has added a new source of demand for the metal.
Nickel extraction, particularly the use of coal energy, has an environmental and health cost and mines have been criticized repeatedly by activists
Thursday’s agreement calls for reinforced environmental standards and sets a target for the mining complex to be carbon neutral by 2040.