Tesla Inc. (NASDAQ: TSLA) Signs Supply Agreement with Australian Lithium Producer

Last week Tesla (NASDAQ: TSLA) entered into an agreement with a lithium producer over a term of four years. Core Lithium is an Australian company that will supply the electric carmaker with almost 110,000 tons of lithium spodumene.

These transactions come at a time when battery metals such as nickel, lithium and cobalt are facing a rise in demand due to the transition to electric vehicles as the world looks to cut down on carbon emissions.

Core Lithium is thrilled with the partnership and is optimistic about growing its future working relationship with Tesla. According to Stephen Biggin, the company’s managing director, the company finds it encouraging that Tesla is interested in its plans for expanding its downstream processing.

The project has been authorized by government officials of Australia’s Northern Territory, and the company will use $116 million that was raised from investors and stakeholders. The lithium spodumene concentrate that is being supplied by Core Lithium will come from the Finniss Lithium Project, which is near Darwin, the capital of the Northern Territory.

Core Lithium has also signed an agreement with China’s Ganfeng. The company signed a four-year deal and will receive $24 million in new equity; the agreement is currently being reviewed by Chinese authorities.

Construction of the Finnis Project began last October, and Core Lithium expects that the production of the lithium spodumene concentrate will commence by the fourth quarter of 2022. It is estimated that four-fifths of the project’s starting output is covered by the agreement Core Lithium made with Ganfeng and Yahua. Last November, Tesla made a deal with Ganfeng that would see it secure a supply of lithium for its battery-grade products. The deal, which began this year, is expected to last for three years.

Negotiations are almost complete for the term sheet agreement between Tesla and Core Lithium. Meanwhile, the product purchase agreement is expected to be carried out by late August, and a commencement of supply is expected before August 2023. According to Biggins, the supply is expected in the second half of 2023, and it will stop once the delivery has been achieved or after four years from the time the supply started.

Core is looking to develop downstream lithium chemical processing in a plan known as Stage 3 Expansion. Tesla has agreed to assist as part of the execution of a definitive agreement.

Tesla has lately been forging supply deals as the price of the lithium concentrate reached $3,250 per ton in February. Last month, the EV maker signed a deal with Liontown Resources for a five-year supply of lithium spodumene concentrate.

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