Tesla signs deal to source nickel for battery production from upcoming new mine in the US

Tesla has signed a new deal to source nickel for battery cell production from an upcoming new mine in the United States. It’s a landmark deal to start sourcing the critical battery material in the US and help boost upcoming new mining projects.

Over the last few years, Tesla CEO Elon Musk has been pushing for nickel producers to boost production as he expects the resource could become a bottleneck for battery production.

The company gets its nickel overseas. Vale, the Brazilian mining giant, is Tesla’s main nickel supplier, and the company has recently done a big deal to secure nickel supply from New Caledonia. But, North American production of nickel is limited, and Tesla is not sourcing locally.

There are several new projects in the work as demand for nickel is expected to explode. The EV market is already affecting the nickel industry despite BEVs representing less than 4% of the global auto industry.

Nickel prices went up 85% in the last years. By the end of the decade, it is expected that EV nickel demand could jump from 5% to 59% of overall nickel supply. This is not sustainable, and it is going to require many new nickel mines to open.

Talon Metals, which is working on just such an endeavor in central Minnesota – called Tamarack Project – announced today that it signed a deal with Tesla to supply the automaker with 75,000 metric tonnes (165 million pounds) of nickel in concentrate.

Henri van Rooyen, CEO of Talon, commented on the deal:

This agreement is the start of an innovative partnership between Tesla and Talon for the responsible production of battery materials directly from the mine to the battery cathode. Talon is committed to meeting the highest standards of responsible production that is fully traceable and that has the lowest embedded CO₂ footprint in the industry. Talon is excited to support Tesla’s mission to accelerate the transition to renewable energy

Drew Baglino, SVP of Powertrain and Energy Engineering at Tesla, added:

The Talon team has taken an innovative approach to the discovery, development and production of battery materials, including to permanently store carbon as part of mine operations and the investigation of the novel extraction of battery materials. Responsible sourcing of battery materials has long been a focus for Tesla, and this project has the promise to accelerate the production of sustainable energy products in North America

Talon Metals shared the main details of the deal:

• Under the terms set out in the agreement, Tesla has committed to purchase 75,000 metric tonnes (165 million lbs) of nickel in concentrate, representing a portion of the metals projected to be produced from the Tamarack Nickel Project. Tesla also has a preferential right under the agreement to negotiate the purchase of additional nickel concentrate over and above the initial 75,000 metric tonne commitment.
• The term of the agreement is six (6) years or until a total of 75,000 metric tonnes (165 million lbs) of nickel in concentrate has been produced and delivered to Tesla. The agreement is conditional upon: (i) Talon earning a 60% interest in the Tamarack Nickel Project; (ii) Talon commencing commercial production at the Tamarack Nickel Project; and (iii) the parties completing negotiations and executing detailed supply terms and conditions. Talon will use commercially reasonable efforts to achieve commercial production on or before January 1, 2026 at the Tamarack Nickel Project, which may be extended by the agreement of the parties for up to 12 months following which Tesla has a right to terminate the agreement and Talon may elect to sell to other parties.
• Talon and Tesla will work together to optimize nickel concentrate grades and metal recoveries.
• The purchase price to be paid by Tesla for the nickel in concentrate will be linked to the London Metals Exchange (LME) official cash settlement price for nickel. The parties have also agreed to share in any additional economics derived from by-products extracted from the nickel concentrate, such as iron and cobalt.

The Tamarack project is expected to enter its production phase in 2026.

A major electric automaker like Tesla deciding to support a project to establish a local supply chain for nickel is a good signal for junior nickel miners in North America.

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