Tesla has been ramping up deals to secure future supply of critical battery metals at upcoming mines lately, and it’s now adding another lithium contract with a new mine in Australia.

With the rise in popularity of electric vehicles, several critical materials to battery production, like nickel, lithium, and cobalt, are becoming bottlenecks in growing the overall EV production capacity.

In order to encourage new production to come online, battery manufacturers and automakers are starting to sign contracts and off-take agreements with junior mining projects that are not in production yet.

This helps these projects secure financing to bring the mines to production, which is an extremely capital-intensive process.

In January, Tesla signed such a deal to secure nickel from a new mine in the US.

At the time, we noted to expect more of these types of deals from Tesla in the near future as the race to secure critical battery metals is ramping up.

Tesla ended up adding another deal with an upcoming lithium mine in Australia developed by Liontown.

Now the automaker is again going back to Australia to secure lithium – this time for a new lithium mine in the Northern Territory developed by Core Lithium.

The Australian company announced the deal today:

“Australia’s next lithium producer, Core Lithium Ltd (ASX: CXO) (Core or Company), is pleased to announce that it has entered into a legally binding Term Sheet with Tesla, Inc. (Tesla) for the supply of up to 110,000 tonnes of Li2O spodumene concentrate from the Finniss Lithium Project over a term of 4 years, with pricing referenced to the market price for spodumene concentrate, subject to a price floor and ceiling (Term Sheet).”

This secures Tesla a significant supply of lithium, and while it comes with risk since it’s from an upcoming mine, the risk is limited since the project is fully-funded and fairly advanced.

Core Lithium says that production is expected to start in Q4 2022:

“This follows the Company’s recent announcement (see ASX announcement dated 30 September 2021) that the Board has taken a Final Investment Decision to commence development of the Company’s wholly owned Finniss Project, located near Darwin in the Northern Territory. The Company is fully funded to deliver the Finniss Project, which has started construction, through to first lithium concentrate production scheduled for Q4 2022.”

However, the deal with Tesla would only start in the second half of 2023.

Again, we should expect Tesla and other companies to keep doing more of those agreements in the near future to help encourage more new projects in an attempt to avoid major supply chain issues when it comes to raw battery materials during the second half of the decade.

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