Market analysis

3 Things You Need to Know About Tesla’s Latest Nickel Mining Deal

Tesla announced last week it struck a multi-year deal with Prony Resources for the purchase of 42000 tonnes of nickel.

1. Electric vehicle demand will shape the mining industry

Seen an essential component for EV batteries, nickel will see its demand grow eightfold by 2025, and EV cars will make up 30% of total demand by 2030.

Prony Resources took over the activities of Brazilian giant Vale at the Goro site (25% of the world’s known nickel stocks) in southern New Caledonia earlier this year and is targeting 45,000 tonnes of nickel production for 2024, with already 20,000 tonnes announced for the end of 2021.

With this deal, Tesla knows it secure its supply chain for the time being, particularly given its production target of 1 million cars next year.

2. Nickel is now a strategic commodity

According to Rystad Energy consultancy, nickel might become the first battery mineral to experience shortages, with global demand expected to rise by at least 1 million tons in 2024 and above available supplies. Nickel is currently trading at $19,100/tonne at the London Metals Exchange after a 20% rise in the past year.

With price risk management in mind, Prony has locked prices of at least $20,000 per tonne for 5,000 tonnes of nickel.

3. The future of mining is bright green

The global push for a clean energy transition is making battery-related metals like nickel and cobalt a strategic asset for transport and energy giants, and their production could increase by nearly 500% by 2050, according to a World Bank report.

Tesla was already an environmental responsibility and sustainability partner with Prony, and the further involvement of Musk in the operation highlights how important these issues are for the number one global carmaker.

The ownership breakdown also reveals a more sustainable approach to mining projects with an emphasis on enhancing positive impact to local communities: the capital of Prony is 51% owned by the three Provinces of New Caledonia, the group’s employees, and local customary players.

As transport undergoes a deep transformational change, the Tesla deal is yet another testament to the need for fewer dependencies on traditional ore producers like China and the end of the oil era, a premise to the rare metals one.

Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances, or needs.


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