Tesla signed a large nickel mine contract again to purchase more than 42000 tons of nickel from Prony Resources.

On Wednesday, local time, French New Caledonian mining company Prony Resources announced a multi-year nickel supply agreement with Tesla, which will purchase more than 42000 tons of nickel. Prony did not disclose the duration of the contract with Tesla.

Since last year's announcement of high nickel and low cobalt as the future direction of battery development, Tesla has made ensuring an adequate supply of nickel a top priority, and the company signed a nickel supply agreement with Australian mining giant BHP Billiton earlier this year.

Tesla expects to use about 30, 000 tons of nickel to produce batteries this year and is likely to increase nickel consumption rapidly in the coming years, according to Steven Brown, an independent mining consultant.

In March, Brazilian mining giant Vale announced the sale of its New Caledonia subsidiary VNC to Prony. After the deal was completed, Prony said it aimed to produce 44000 tons of nickel by 2024, double its expected production in 2021, and would start cutting costs, while promising to clean up the remaining waste from the plant.

The government of new Caledonia and other local interest groups own 51 per cent of Prony, while global energy trader Trafigura owns 19 per cent, with the rest held by a joint venture between Prony resource management and investment firm Agio global.

Prony expects the nickel market to return to oversupply within four years from 2022, in part because Indonesia, the largest nickel producer, will increase supply, although it adds that by 2026, as demand for nickel in the battery industry reaches "exponential" levels, the market will once again be in short supply.

Prony said it had prepared a hedging plan to deal with price risk. LME nickel has risen about 20 per cent in the past 12 months and is now trading at about $19100 a tonne.