Tesla Signed a Big Contract with Prony Resources to Buy over 42,000 mt of Nickel

SHANGHAI, Oct 14 (SMM) – French New Caledonian mining company Prony Resources announced that it has reached a multi-year nickel supply agreement with Tesla on September 13, which will purchase more than 42,000 mt of nickel.

Since announcement of high nickel and low cobalt as the future direction of battery development last year, Tesla has made ensuring a sufficient supply of nickel its top priority. The company also signed a nickel supply agreement with Australian mining giant BHP Billiton early 2021. 

Independent mining consultant Steven Brown said that Tesla is expected to use about 30,000 mt of nickel to produce batteries this year, and its nickel consumption may increase rapidly in the next few years.

Brazilian mining giant Vale announced the sale of its New Caledonia subsidiary VNC to Prony in March. After the transaction is completed, Prony said that the company's goal is to produce 44,000 mt of nickel by 2024, doubling the output estimate in 2021, and it will also cut costs and work hard to clean up residual waste from the factory.

The New Caledonian government and other local interest groups hold 51% of Prony shares. Global energy trader Trafigura holds 19% of the shares. The remaining shares are held by a joint venture between Prony Resource Management and joint company of Agio Global. Prony predicted that the nickel market will resume its oversupply situation within 4 years from 2022, partly because Indonesia, the largest nickel producer, will ramp up its supply. However, the company added that the market will once again return to short supply as the demand in the battery industry reaches "exponential level” by 2026.

Prony said the company has prepared a hedging plan to deal with price risks. LME nickel prices have risen by approximately 20% in the past 12 months, and the current transaction price stands at approximately $19,100/mt.